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The government of a given country cares about the environment and also about per-capita consumption according to some preferences represented by the utility function u(e,
The government of a given country cares about the environment and also about per-capita consumption according to some preferences represented by the utility function u(e, c), where e represents the state of the environment and c represents consumption (think of e as a measure of well-being, so higher e is better). The experts have determined that e = p(co - c), where co is a baseline level of consumption and p > 0. (a) Write down the government maximization problem. Which is the constraint? What is the price of the environment in terms of consumption
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