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Charlotte's preferences over consumption, c, and leisure, I, are given by the utility function u(c,l) = In(c) In(l). Charlotte can split her time between leisure
Charlotte's preferences over consumption, c, and leisure, I, are given by the utility function u(c,l) = In(c) In(l). Charlotte can split her time between leisure and work, N. Total time is normalized to 1, such that l N = 1. Charlotte faces a real wage of w units of the final good per one unit of time and the price of consumption is normalized to 1. Additionally, Charlotte has B units of non-labor income. 1. Write the budget constraint Charlotte faces. 2. substitute the budget constraint into the utility function and express the optimization problem Charlotte faces as a function of leisure, I, the wage rate, w and her non-labor income, B
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