Write down pierre budget constraint

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Pierre values consuming goods (C) and enjoying leisure (l). Pierre has h = 1 units of time to divide between working and enjoying leisure. For each hour worked, he receives w = 1 units of the consumption good. Suppose that Pierre's preferences are described by the the utility function

2/3 1/3 U(C,l)=C l .

Pierre also owns shares in a factory which gives him an additional π = 0.125 units of income. The government in this economy taxes labour income only and uses the proceeds to buy consumption goods that are given to the army. Pierre pays a lump sump tax equal to 0.35.

  1. Write down Pierre's budget constraint.
  2. Is it optimal for Pierre to supply 0.75 units of labour?

Reference no: EM132440689

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