This problem considers the decisions of a consumer whose preferences are given by u(C, 1) = C+ylogl, in which C is the quantity of consumption and I is the quantity of leisure. The consumer faces two constraints. The time constraint is given by I+N³ = 1 with N as the time spent working (or the labor supply). Assume that 0 << 1. The main advantage of working is the wages consumers receive. Consumers take wages as given (outside of their control) and obtain wage income equal to w Nº. The budget constraint is C = wN+-T, with as real dividend income and T as the real lump-sum taxes paid to government. Assume that an interior solution always exists in the optimal consumption-leisure choice.

This problem considers the decisions of a consumer whose preferences are given by u(C, 1) = C+ylogl, in which C is the quantity of consumption and I is the quantity of leisure. The consumer faces two constraints. The time constraint is given by I+N³ = 1 with N as the time spent working (or the labor supply). Assume that 0 << 1. The main advantage of working is the wages consumers receive. Consumers take wages as given (outside of their control) and obtain wage income equal to w Nº. The budget constraint is C = wN+-T, with as real dividend income and T as the real lump-sum taxes paid to government. Assume that an interior solution always exists in the optimal consumption-leisure choice.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Can you help me with part b please?