Carla’s utility is described by U(Le,Y) = 40 Le1/2Y1/2,

| November 24, 2016

Carla’s utility is described by U(Le,Y) = 40 Le1/2Y1/2, where Le is hours of leisure and Y is total income. The best wage that Carla can earn is $20 per hour and she receives $400 per week from a divorce agreement. Carla has 100 hours per week to allocate between labor and leisure.

(a) How many hours will Carla work given the parameters described above?
(b) How many hours would Carla work if she did not receive the weekly payment from the divorce settlement?

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