1. Suppose in a competitive labor market, the wage rate initially is wo > 0. Liz and Kate choose leisure and consumption to maximize their utility. Everyone has a total number of 7 = 1600 hours per year to allocate between work and leisure. Liz and Kate have the same non-labor income but they have different preferences over leisure and consumption. For both Liz and Kate, marginal utilities from leisure and consumption are always positive. Moreover, leisure is a normal good for both Liz and Kate. However, when a wage rate increases, the income effect dominates the substitution effect for Liz. But for Kate, the substitution effect of a wage increase dominates the income effect. Which of the following statements is correct? (a) If non-labor income and wage rate both increase, Kate would definitely work less. (b) If non-labor income and wage rate both increase, Liz would definitely work less. (c) If non-labor income and wage rate both increase, it is unclear whether Liz would work more or less. (d) If non-labor income increases and wage rate decreases, Kate would definitely work more. (e) If non-labor income decreases and wage rate increases, Kate would definitely consume more. (f) If non-labor income decreases and wage rate remains the same, Liz would work more but Kate would work less