Suppose an individual has an endowment of T units of time that she can devote to labor supply (L) or leisure (R), so T=L + R. There is one consumption good in the economy, denoted C, of which she has no endowment. Her endowment bundle is thus (eR, eC)=(T, 0). Let the price of the consummption good be one, and the wage w.

-Now suppose that her Cobb-Douglas preferences are described by the utility function u(R,C) = R*C and that her wage is initially w =1. If the wage increases to w =2, decompose the change in her labor supply into the income effect and the substitution effect.