The figure given below shows the income-leisure trade off of an individual. Figure 15.6 AB and AC: Income constraints of the individual
I 1 ,I 2 ,and I 3 curves show the income leisure choices of the individual.
-In Figure 15.6,if the income constraint of the individual is given by the line AC,he maximizes his utility by choosing _____ hours of leisure and _____ units of income.

Question

The figure given below shows the income-leisure trade off of an individual. Figure 15.6  AB and AC: Income constraints of the individual
I 1 ,I 2 ,and I 3 curves show the income leisure choices of the individual.
-In Figure 15.6,if the income constraint of the individual is given by the line AC,he maximizes his utility by choosing _____ hours of leisure and _____ units of income.

Quizplus · Accepted Answer

The individual will choose the highest indifference curve that touches or intersects the budget constraint line AC. In this case, that is the I₂ curve, which intersects the line at L₂ hours of leisure and Y₃ units of income. Therefore, the answer is D.

The Figure Given Below Shows the Income-Leisure Trade Off of an Individual