My Math Forum  

Go Back   My Math Forum > Science Forums > Economics

Economics Economics Forum - Financial Mathematics, Econometrics, Operations Research, Mathematical Finance, Computational Finance

LinkBack Thread Tools Display Modes
May 7th, 2012, 05:59 AM   #1
Joined: May 2012

Posts: 1
Thanks: 0

Help with budget constraint and utility maximisation

Hi I really need help with the following question:

Consider an economy with a single consumer whose preferences are given by
U = c-(l)^2
Where c is the consumers daily consumption of the consumption good and l is the number of hours that she spends producing the consumption good daily.
She can Produce 8 units of the consumption good in an hour and there are 24 hours in a day.
(a) Write down the consumers budget constraint and interpret it.
(b) How many hours per day does the consumer choose to work? How many units
of the consumption good does she get to consume in a day?

It confuses me that the utility preference is in this form c-l^2. I have looked online and only seem to find information on how to calculate cobb douglas utility functions. So far I've managed to draw a graph with consumption on y axis and leisure on x axis. Formulating the BC at pc=wl, here i assumed this to be c=8l. I'm left confused and my answers for sure don't add up

Any advice would be greatly appreciated
palarce is offline  

  My Math Forum > Science Forums > Economics

budget, constraint, maximisation, utility

Thread Tools
Display Modes

Similar Threads
Thread Thread Starter Forum Replies Last Post
constraint problem helloprajna Economics 0 February 17th, 2013 11:04 PM
difficult maximisation problem brighton Calculus 8 March 8th, 2012 05:11 AM
Applications of Maximisation and Minimisation FryderykFChopin Calculus 2 September 7th, 2011 11:20 AM
Linear programming - profit maximisation jb7 Applied Math 3 December 28th, 2009 12:09 PM
difficult maximisation problem brighton Complex Analysis 0 December 31st, 1969 04:00 PM

Copyright © 2019 My Math Forum. All rights reserved.