Mr.Cog has 18 hours per day to divide between labor and leisure.His utility function is U(C, R)= CR, where C is dollars per year spent on consumption and R is hours of leisure.If he has 5 dollars of nonlabor income per day and gets a wage rate of 11 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)C = 203 + 11R.
B)R + C/11 = 269.
C)11R + C = 5.
D)11R + C = 203.
E)C = 218 + 11R.

Question

Quizplus · Accepted Answer

Mr. Cog has 18 hours per day, so if he takes R hours of leisure, he works (18-R) hours. His income from work is 11 dollars per hour times the hours worked, plus 5 dollars of nonlabor income. Therefore, his total income (which he can spend on consumption, C) is $11 \times (18-R) + 5$. Simplifying this gives $11 \times 18 - 11R + 5 = 198 + 5 - 11R = 203 - 11R$, which matches the equation in choice D.

MrCog Has 18 Hours Per Day to Divide Between Labor