題組內容

6. A utility-maximizing individual allocates his monthly time of 720 hours into work (H) and leisure (N). He gains utility from his leisure hours (N) and the income (Y) he earns from his work hours (H). His utility function is $U(Y, N) = Y^\alpha N^\beta$, where $\alpha$ and $\beta$ are positive parameters. The person's hourly wage is given by w, and he has non-labor income Y.* Suppose the government imposes a tax on labor income. The tax rate is t, where 0 < t < 1. (25%)

(4) Assume the government could collect the same amount of tax either by the tax rate t on labor income or the lump-sum tax $T. Which policy do you think the individual would prefer? The tax on labor income or the lump-sum tax? Why? (7%)