Fact: A representative consumer in an economy consumes only two goods: consumption goods, denoted as C (numeraire), and leisure, denoted as l. Each day, the consumer has h hours to divide between work and leisure, earns an hourly wage rate of $w, earns dividend income equal to , and pays proportional income tax, where the tax rate is t.

[a] Denote whether the following is true or false for the consumer: "The real wage denotes the number of units of labour time that can be exchanged for one unit of consumption goods"

[b] Write the general equation of this consumer's budget constraint.

[c] Draw a diagram to illustrate what happens if tax decreases for a consumer who has income effect equal to substitution effect. Explain whether labour supply (1) increases, or (2) decreases, or (3) remains the same for this consumer.