Professional Documents
Culture Documents
The neoclassical model analyzes the trade-off between leisure hours and working
hours
Railroad work.
Households are suppliers of labour. In microeconomic theory, people are assumed to
be rational and seeking to maximize their utility function. In the labour market
model, their utility function expresses trade-offs in preference between leisure
time and income from time used for labour. However, they are constrained by the
hours available to them.
Let w denote the hourly wage, k denote total hours available for labour and
leisure, L denote the chosen number of working hours, p denote income from non-
labour sources, and A denote leisure hours chosen. The individual's problem is to
maximise utility U, which depends on total income available for spending on
consumption and also depends on time spent in leisure, subject to a time
constraint, with respect to the choices of labour time and leisure time: