Consider a consumer who has to choose how much to work. Their preference for consumption and...

 

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Consider a consumer who has to choose how much to work. Their preference for consumption and leisure is given by: U(c, 1) = ln(c-1) + In(1) Assume that the price of consumption is 1, the wage per unit of time is 10 and they don't have any non-labour income. The worker has 1 unit of time available. a) (4) What is the leisure and consumption decision of this worker? b) (4) Suppose the government gives a subsidy of $4 per hours worked from the worker. What would be the direct change from the tax in labour and consumption? c) (4) What is the substitution and income effect from the $4 subsidy? Consider a consumer who has to choose how much to work. Their preference for consumption and leisure is given by: U(c, 1) = ln(c-1) + In(1) Assume that the price of consumption is 1, the wage per unit of time is 10 and they don't have any non-labour income. The worker has 1 unit of time available. a) (4) What is the leisure and consumption decision of this worker? b) (4) Suppose the government gives a subsidy of $4 per hours worked from the worker. What would be the direct change from the tax in labour and consumption? c) (4) What is the substitution and income effect from the $4 subsidy?