Mr. Cog in Problem 7 has 18 hours a day to divide between labor and leisure. If he has 9 dollars of nonlabor income per day and gets a wage rate of 15 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

Question

Quizplus · Accepted Answer

The budget equation for Mr. Cog can be derived as follows:

Total time in a day = Labor time + Leisure time
18 = L + R

Total income in a day = Nonlabor income + Labor income
Total income = 9 + 15L

Now, we can solve for L in terms of R:

L = 18 - R

Substituting this into the expression for total income, we get:

Total income = 9 + 15(18-R)
Total income = 279 - 15R + 9
Total income = 288 - 15R

Finally, we can solve for consumption C:

C = Total income - Nonlabor income
C = 288 - 15R - 9
C = 279 - 15R

Therefore, the correct budget equation is 15R + C = 279, which is choice (C).

Mr Cog in Problem 7 Has 18 Hours a Day