QUESTION 1 An agent has preferences defined over a consumption good and leisure. His utility functionis U=(c-vy ]2 I, where is the amount of consumption good he consumes and | is the amount of leisure time. The parameter y > 0 iz a minimum consumption requirement. The agent has an endowment of h units of time, which he divides between leisure (1) and work (n): | + n = h. The agent receives an after-tax wage of g = w (1- 1), where w is the agent's real wage (wage measured in terms of the consumption good, and 7is a marginal income tax rate (2.g., 7=.15). The agent's consumption c is constrained by his earnings, c=w {1-1)n=qn. Given this information, please answer the following questions: PART A Assume q =40 h =100, y=1000. The agent's optimal choice for consumption =_l l_ and for leisure = __ | - PART B. Assume q =25, h =100, v = 1000. The agent's optimal choice for consumption c =_| l_ and for leisure = | - PART C. The change in the agent's choices between PART A and PART B can be broken down into income and substitution effects, using the Slutsky method as we did in class. The substitution effect for the consumption choice is _ | l_ and the substitution effect for the leisure choice is The income effect for the consumption choeice is_l l_ and the income effect for the leisure choice is _I l_