Question
Consider a person who like consumption (C) and dislikes labor (N) in this way: U = ln(C) - N This is a one-period model of
Consider a person who like consumption (C) and dislikes labor (N) in this way:
U = ln(C) - N
This is a one-period model of course.
The person gets to consume by earning wages and by getting a "national dividend" (D) from the government. To keep it simple, we'll assume that one hour of work yields an one extra unit of the consumption good.
C = N + D
This person maximizes utility subject to the above budget constraint.
Question: For this person, if the national dividend (D) rises by one unit, how much does total consumption (C) change as a result? In other words, what is dC*/dD for this person?
Answer with a number. If you think dC*/dD is 7, write 7.
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