What is the budget line for consumption (C) and leisure (L) if a person faces a constant wage of $10 per hour, there are 112 hours in the week to work, and she receives nonlabor income of $220 per week?

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Quizplus · Accepted Answer

The budget line equation is derived from the total possible income (from labor and nonlabor sources) minus the consumption spent on leisure. If the wage is $10 per hour and there are 112 hours available, the total possible income from labor is $10 * 112 = $1120. Adding the nonlabor income of $220 gives a total possible income of $1120 + $220 = $1340. The budget line equation that represents the trade-off between consumption (C) and leisure (L) hours not worked (thus, multiplied by the wage to convert into monetary terms) is C + 10L = 1340.

What Is the Budget Line for Consumption (C) and Leisure