Labor Economics and Public Policy – Assignment #1 1
Chan 19KC1029
Tran Thi Tam Thanh (Chan)
19KC1029
October 1st, 2020
Labor Economics and Public Policy – Assignment #1
1. Explain X, Y and Z points using the concepts of C, L, utility, indifference curve.
- There are four important factors in the graph above, including: Consumption (C),
Leisure (L), Utility of an individual and Indifference Curve.
+ C is the total dollar value of all the goods that the person consumes.
+ L is the number of hours of leisure that the person consumes.
+ An index U (utility) stands for the individual’s level of satisfaction or happiness. The
utility function transforms the person’s consumption of goods and leisure into an
index U. The relation among C, L, U is shown by the formula:
U = f (C, L)
, Labor Economics and Public Policy – Assignment #1 2
Chan 19KC1029
+ Indifference curve shows how we can describe a person satisfaction obtained from
consumption and leisure by using a graph. The curve shows the combinations of
leisure and work that will give the individual a specific level of utility.
+ Applying to points in the graph, we have:
The X point means that the person can obtain consumption of $400 and have 125 hours
for leisure in the same time, and the value of his utility is 25,000 utilities.
The Y point means that the person can obtain consumption of $500 and have 100 hours
for leisure in the same time, and the value of his utility is 25,000 utilities.
The Z point means that the person can obtain consumption of $450 and have 150 hours
for leisure in the same time, and the value of his utility is 40,000 utilities.
As we observe, the utility value of Z point is higher than X and Y point, which means the
more consumption and leisure are, the better for an individual’s utility.
2. Explain four properties about indifference curves.
There are four properties of difference curve.
a) Indifference curve are downward sloping curve with one side up and the other down)
Individuals prefer more of both consumption and leisure. However, individuals cannot
obtain both of them in the same time so there is a negative relationship between them
which means that if individuals want more hours of leisure with the same utility, he has
to give up on his consumption of good and vice versa.
b) The higher indifference curves indicate higher levels of utilities.
- The higher indifference curve indicates the higher level of Consumption, Leisure, or
both of them as Utility. Considering Utility function, people act to maximize their
Chan 19KC1029
Tran Thi Tam Thanh (Chan)
19KC1029
October 1st, 2020
Labor Economics and Public Policy – Assignment #1
1. Explain X, Y and Z points using the concepts of C, L, utility, indifference curve.
- There are four important factors in the graph above, including: Consumption (C),
Leisure (L), Utility of an individual and Indifference Curve.
+ C is the total dollar value of all the goods that the person consumes.
+ L is the number of hours of leisure that the person consumes.
+ An index U (utility) stands for the individual’s level of satisfaction or happiness. The
utility function transforms the person’s consumption of goods and leisure into an
index U. The relation among C, L, U is shown by the formula:
U = f (C, L)
, Labor Economics and Public Policy – Assignment #1 2
Chan 19KC1029
+ Indifference curve shows how we can describe a person satisfaction obtained from
consumption and leisure by using a graph. The curve shows the combinations of
leisure and work that will give the individual a specific level of utility.
+ Applying to points in the graph, we have:
The X point means that the person can obtain consumption of $400 and have 125 hours
for leisure in the same time, and the value of his utility is 25,000 utilities.
The Y point means that the person can obtain consumption of $500 and have 100 hours
for leisure in the same time, and the value of his utility is 25,000 utilities.
The Z point means that the person can obtain consumption of $450 and have 150 hours
for leisure in the same time, and the value of his utility is 40,000 utilities.
As we observe, the utility value of Z point is higher than X and Y point, which means the
more consumption and leisure are, the better for an individual’s utility.
2. Explain four properties about indifference curves.
There are four properties of difference curve.
a) Indifference curve are downward sloping curve with one side up and the other down)
Individuals prefer more of both consumption and leisure. However, individuals cannot
obtain both of them in the same time so there is a negative relationship between them
which means that if individuals want more hours of leisure with the same utility, he has
to give up on his consumption of good and vice versa.
b) The higher indifference curves indicate higher levels of utilities.
- The higher indifference curve indicates the higher level of Consumption, Leisure, or
both of them as Utility. Considering Utility function, people act to maximize their
