I. Module 3 Homework 2 [practice]: Leisure

Due No due date
Points 5
Questions 4
Time Limit None
Allowed Attempts 2

Instructions

Suppose people have utility over consumption and leisure, $LaTeX: u(c_{t},l_{t})$ where $LaTeX: l_{t}$ denotes hours of leisure during the day, and face a wage rate $LaTeX: w_{t}$ . Thus, the overall utility function is

$LaTeX: \sum\beta^{t}u(c_{t},l_{t}).$ the budget constraint might look like

$LaTeX: W_{t+1}=\left( \sum_{i=1}^{N}w_{i}R_{t+1}^{i}\right) W_{t}-c_{t} +w_{t}(H-l_{t})$

where LaTeX: H is the available hours in the day. (You won't use this budget constraint. I just wrote it down to make more clear how leisure and consumption work.)

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