This condition is related to the income that an

individual needs to purchase goods and services in the marketplace. The

individual’s income are the sum of his/her the wage rate (W*H) and non-labor

incomes (V). This equation implies that

the individual consumption expenditures is equal to the total income. We can

rewrite equations (2) and (3) as follows:

W(T-L) + V = C (4)

The individual’s utility maximization problem

becomes:

Max U (C, L) subject to C = W (T-L) + V (5)

The first order conditions solution yield the

following equations:

MaxUC=

(6)

MaxUL=

W (7)

Hence, the following principle was derived:

W= MRS (UL for UC) (8)

In order to maximize utility, given the real wage

(W) the individual should select to work that number of hours for which the

marginal rate of substitution of leisure for consumption is equal to real wage (Nicholson,

2005) .

Moreover, based on consumer theory, Ackah et al

(2009)1

argue that, if an individual maximizes his/her utility (U) function for

consumption of items (C) and leisure (L), the model can be expressed as

1 This study would like to assess the

determinants of socio-economic and demographic factors of the labor force

participation, thus, we will adopt the

extension of utility maximization theory in which Ackah et al (2009) included

the variable

X which represents individual characteristics such as age, marital status etc.

For

more details on the derivation of utility optimization, see Ackah et al (2009).