An individual will allocate time between labour and leisure by finding the point at which:
A) he or she maximizes utility while remaining beneath the time allocation budget line.
B) the time allocation budget line is just tangent to an indifference curve.
C) he or she reaches the lowest possible indifference curve while still on the time allocation budget line.
D) he or she is indifferent between work and leisure.

Question

Quizplus · Accepted Answer

The individual will allocate time between labour and leisure to achieve maximum utility by finding the point where the time allocation budget line is tangent to an indifference curve. At this point, the marginal rate of substitution between labour and leisure is equal to the wage rate, indicating that the individual is receiving the same level of satisfaction from an hour of work as they would from an hour of leisure. This means that they have achieved the optimal allocation of time between labour and leisure.

An Individual Will Allocate Time Between Labour and Leisure by Finding