\"Anjali and Sanu are married, and Sanu is the breadwinner. Anjali provides 4 no

Question

"Anjali and Sanu are married, and Sanu is the breadwinner. Anjali provides 4 non-market hours of service daily, and her productivity at home is $15. Sanu's earnings are $20/hour, and his productivity at home is $10/hour. Draw his daily budget constraint in a 16hour day."

I calculated that if he worked 16 hours he earns $320, and if he stays at home he produces $160 in non-market goods. It is here I am stuck; do I graph his income as a downward slope from 320 on the Y axis and 16 hours on the X axis, or do I put Labour income on the Y and domestic production on the X? I can't quite figure out if the Anjali information is thrown in here for fun.

Thanks in advance for your help, I appreciate it.

Explanation / Answer

Ill just walk you through your graphing: Lets put non-market goods on the Y and market goods on the X axis. Anjali provides 4*15=$60 worth in non-market goods, regardless of how much Sanu earns. If Sanu only works at home, he will provide 10*16=$160 worth in non-market goods. Therefore their maximum consumption in Y equals 60+160=$220 This is the point (x,y)=(0,220) on the graph. If Sanu decides to only work outside of the home, he earns 20/hour --> maximum earnings=20*16=320 In this case, Sanu earns $320 dollars and Anjali provides $60 in non-market goods This is the point (x,y)=(320,60) To complete the budget, draw a vertical line from the last point to the x-axis (to point (320,0))

Related Questions

Navigate

• Browse (All)
• Browse #
• Subjects

---