. Make a graph with the budget constraint showing the trade-off between lifetime consumption and number of children. (Ignore the fact that children come only in whole numbers!) Show indifference curves and an optimum choice. b. Suppose the wage increases to $15 per hour. Show how the budget constraint shifts. Using income and substitution effects, discuss the impact of the change on number of children and lifetime consumption. c. We observe that, as societies get richer and wages rise, people typically have fewer children. Is this fact consistent with this model? Explain.
. Make a graph with the budget constraint showing the trade-off between lifetime consumption and number of children. (Ignore the fact that children come only in whole numbers!) Show indifference curves and an optimum choice. b. Suppose the wage increases to $15 per hour. Show how the budget constraint shifts. Using income and substitution effects, discuss the impact of the change on number of children and lifetime consumption. c. We observe that, as societies get richer and wages rise, people typically have fewer children. Is this fact consistent with this model? Explain.
Chapter3: Preferences And Utility
Section: Chapter Questions
Problem 3.15P
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Question
- Consider a couple's decision about how many children to have. Assume that over a lifetime a couple has 100,000 hours of time to either work or raise children. The wage is $10 per hour. Raising a child takes 10,000 hours of time.
a. Make a graph with the budget constraint showing the trade-off between lifetime consumption and number of children. (Ignore the fact that children come only in whole numbers!) Show indifference
b. Suppose the wage increases to $15 per hour. Show how the budget constraint shifts. Using income and substitution effects, discuss the impact of the change on number of children and lifetime consumption.
c. We observe that, as societies get richer and wages rise, people typically have fewer children. Is this fact consistent with this model? Explain.
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