Tom has the utility function U = LY2, where U is utility, L is
the number of free time and Y is income. The total number or hours
that can be used in leisure time work, T, is 300 and the salary, W,
is 4 per hour. Under these conditions, Tom maximizes his work (H)
100 hours and 200 hours of free time (T). Tom hires himself for a
job where the working hours (H) are 100.
a. What are Tom benefits?
b. Now hardens a year and his working hours are shortened to 50
hours. What are its benefits now?
c. How much would Tom's salary need to be improved for his
benefits to now be the same as in the beginning.
Tom has the utility function U = LY2, where U is utility, L is the number of free time and Y is income. The total number
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