1. (6 points) Henry has a utility function u(c, l) = J5 + 5x/l. He has two sources of income, salary from working and dividend income from investing his saving in the stock market. His budget constraint is c S w(1 l) + 7r. (a) (2.5 points) Suppose that Henry's wage rate 11) = 25 and his non-wage income 7r 2 10. Compute his optimal time allocation and consumption. (b) (2.5 points) Suppose that the stock market crashed. Henry's non-wage income falls and at the same time a reallocation due to family reason lowers his wage rate. More specically, to = 20 and 71' = 0. Compute his optimal time allocation and consumption in this case. (c) (1 point) Explain the dierence between (a) and (b) using income and substitu- tion effects