## consumers utility depending on the goods leisure (F) and consumer goods (x)

A consumers utility depends on the goods leisure (F) and consumer goods (x).

(i) Explain the difference between normal and inferior goods, and explain what

means that both Leisure and consumer goods are perceived as normal goods.

(ii) Let the number of working hours be given by L, and the number of hours of leisure be given by F.

Explain the connection between L and F within a 24 hours day.

(iii) Assume that the consumer is free to choose how much he wants to work for a fixed hourly wage (w),

and that the consumer in addition has an unemployed income of size (m). Let

the price per unit of consumer goods be given by (p).

Explain why the budget constraint can be formulated in the following context, and give an interpretation:

px + wF = w24 + 2m

(iv) Show how the budget constraint in the previous task can be rewritten: ﻿x=w24/p+m/pw/pF﻿

Illustrate and explain the budget constraint in a diagram with F on the horizontal axis and x

on the vertical axis.

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