Question
Pierre values consuming goods (C) and enjoying leisure (l). Pierre has h = 1 units of time to divide between working and enjoying leisure. For
Pierre values consuming goods (C) and enjoying leisure (l). Pierre has h = 1 units of time to divide between working and enjoying leisure. For each hour worked, he receives w = 1 units of the consumption good. Suppose that Pierre's preferences are described by the the utility function
2/3 1/3 U(C,l)=C l .
Pierre also owns shares in a factory which gives him an additional = 0.125 units of income. The government in this economy taxes labour income only and uses the proceeds to buy consump- tion goods that are given to the army. Pierre pays a lump sump tax equal to 0.35.
- Write down Pierre's budget constraint.
- Is it optimal for Pierre to supply 0.75 units of labour?
I don't understand how to find the budget constraint when Taxes is not given in this question and also I don't know the difference between optimal or not optimal the supply
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