7b. The Labor-Leisure Problem

In this video, I present the basics of the labor-leisure problem in microeconomics. In particular, I work an example from my childhood when I learned the time value of money by being paid to do my chores.

This video gives the basic framework for the labor-leisure problem. There are more complicated scenarios. If you have demand for seeing a more complicated scenario, leave a comment on this video.

This video relates most closely to my consumer theory unit and the unit on endowment economies. You can view the labor-leisure budget constraint as a special case of an endowment economy. The individual is endowed with 24 hours of leisure and can trade that off. Hope this is helpful!

Check out a description of my teaching activities here:

www.tonycookson.com/teaching

Check out a list of the videos in this series (organized by topic) here:

http://blog.thisyoungeconomist.com/p/learn-microeconomics.html

The book my videos follow and supplement is available for purchase at Lulu.com (I self-published it).

www.lulu.com/cookson

If you like my videos, book or approach to economics, the best compliment is a referral of my resources to a friend. If they're like you, it's a pareto improvement. For more on pareto improvements, see this video:

http://www.youtube.com/watch?v=uFooIEoBPq0

Category:

Education

Tags:

• labor-leisure
• microeconomics
• intromediate microeconomics
• consumer theory
• indifference curves
• budget constraints
• endowment economies

[fishstick12345]

Thank you! You maximize my utility.

[intromediateecon]

@fishstick12345 I'm glad to hear it :)  But, some advice for when I am not around, keep your indifference curves tangent to the budget constraint and you'll be just fine. ;)

[heckler73]

I'd like to see you actually derive the indifference curves, and factor in SLEEP. Would Sleep be considered a Giffen good?

[intromediateecon]

@heckler73 Re: deriving indifference curves, I'd need a utility function to do that and I'd rather not go into that level of detail here. See Videos 6a, 6b, 6c or 9a for more details. Re: Sleep. Sleep is a component of leisure as it is time spent not working. That pesky motivation to sleep is why you would never consider optimal the corner solution with no leisure. I doubt that sleep is Giffen (first, it would have to be inferior. See video 11).

[heckler73]

@intromediateecon

Thanx for the pointers to your other vids, that's helpful.

RE: Sleep as Giffen

My train of thought here is if sleep becomes more expensive (due to lack), then wouldn't it's demand go up? Although, x-reffing Wiki suggests to me that "sleep" may fall under the "experience goods" category (which I am unfamiliar with). Maybe that's what I am thinking of.

[intromediateecon]

@heckler73 I'm not crystal clear on what you mean here. It's true that when the wage increases, quantity demanded of leisure (and sleep) may increase as a result. But, this isn't quite a Giffen good because the budget constraint pivots the opposite way (technically, there is actually an endowment effect: we are endowed with time whose price went up, effectively increasing our wealth while making time more expensive; slightly more complicated than the typical price increase story).

[luqmankau]

I'm sure you have a nice mother! Thanks for these useful videos!

[asg102]

enjoyed it! thank you