Mr.Cog has 18 hours a day to divide between labor and leisure.If he has 8 dollars of nonlabor income per day and gets a wage rate of 5 dollars per hour when he works, his budget equation, expressing combinations of consumption and leisure that he can afford to have, can be written as
A)5R + C = 98.
B)R + C/5 = 128.
C)C = 98 + 5R.
D)5R + C = 8.
E)C = 122 + 5R.

Question

Quizplus · Accepted Answer

The budget equation is derived from the total income, which includes nonlabor income and income from labor. Mr. Cog has 18 hours, and if he works all 18 hours, he earns 5 dollars per hour, totaling 90 dollars. Adding the 8 dollars of nonlabor income gives a total of 98 dollars. Therefore, the budget equation is 5R + C = 98, where R is the hours of leisure and C is consumption.

MrCog Has 18 Hours a Day to Divide Between Labor