3. Assume there is a constant per unit opportunity cost of Consumption (call it “Saving”). If...
3. Assume there is a constant per unit opportunity cost of Consumption (call it “Saving”). If an individual wants to maximize his net utility (minus opportunity cost), set up the math problem he would solve. Use this given utility function: U(C) = (1/a) * C^a.
4. Maximize your problem from (3) to solve for the individual’s level of optimal consumption. Does the optimal consumption depend on the opportunity cost? a. Show that the individual will consume more when the opportunity cost of consumption is lower
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3. Assume there is a constant per unit opportunity cost of
Consumption (call it “Saving”). If...
3. Assume there is a constant per unit opportunity cost of Consumption (call it "Saving"). If...
3. Assume there is a constant per unit opportunity cost of Consumption (call it "Saving"). If an individual wants to maximize his net utility (minus opportunity cost), set up the math problem he would solve. Use the utility function from problem 2. Utilit U(C) =-Ca, where C is consumption. y
Question 1. (Consumption-Saving Problem): Suppose that a consumer lives for two periods. The utility function of...
Question 1. (Consumption-Saving Problem): Suppose that a consumer lives for two periods. The utility function of the consumer is given by with u> 0 where c and c2 are consumption in period 1 and period 2 respectively. Sup- pose that consumer has income y in the first period, but has no income in the second period. Consumer has to save in the first period in order to consume in the second period. Let s be the savings in the first...
Question 1. (Consumption-Saving Problem): Suppose that a consumer lives for two periods. The utility function of...
Question 1. (Consumption-Saving Problem): Suppose that a consumer lives for two periods. The utility function of the consumer is given by with u> 0 where c and c2 are consumption in period 1 and period 2 respectively. Sup- pose that consumer has income y in the first period, but has no income in the second period. Consumer has to save in the first period in order to consume in the second period. Let s be the savings in the first...
1. Consider an agent who values consumption in period 0 and 1 according to the following...
1. Consider an agent who values consumption in period 0 and 1 according to the following utility function: u(co, C)In(Co)+8 In(c1) is a discount factor (5 < 1) which indicates that the agnet prefers to consume today more than he can tomorrow. Suppose that the agent is given a total wealth today of w and that he may save any portion of this money in order to consume tomorrow. If he saves money he is paid interest r. Thus the...
Please give a detailed solution, thank you! 4. Two consumers (call them A and B) have utility functions over consumption...
Please give a detailed
solution, thank you!
4. Two consumers (call them A and B) have utility functions over consumption in period 1 and consumption in period 2 given by U (1,C2)n(c)ln(c2) In period 1, consumer A receives income of y 2, the endowments are reversed, consumer A gets y= 120 and consumer B gets y = 80 80 and consumer B receives y? = 120. In period (so they just a. First assume consumers are not allowed to save...
Question 1: Households A household's utility over consumption C and leisure l is U - U(C,0)...
Question 1: Households A household's utility over consumption C and leisure l is U - U(C,0) Cl 1. Plot the household's indifference curve for U-80 for values of C andlless than 20 (i.e. find the curve containing all combinations of C and ( such that U(C, 0) 80) The household has a time endowment of h=16 hours per day. The wage rate per hour is w 1.25. The household's labour income is therefore wNs, where N-h-l-16- l is the time...
5. John Paul derives utility from the consumption of cigars and brandy on friday evenings. His...
5. John Paul derives utility from the consumption of cigars and brandy on friday evenings. His utility from c cigars and b glasses of brandy is given by: (a) First find Uc. Interpret you answer: What does your answer mean to J.P? b) Suppose cost or money is not a problem for J.P. How many cigars and glasses of brandy will he consume on a friday evening? Verify that your answer indeed maximizes U Hint: Hessian (c) Continue to assume...
Bob is deciding how much labour he should supply. He gets utility from consumption of beer...
Bob is deciding how much labour he should supply. He gets utility from consumption of beer (given by C) and from leisure time (given by L), which he spends hanging out with his friend Doug. This utility is given by the following utility function: U(C, L) = ln(C) + 10 ln(L). Given this utility function, Bob’s marginal utility from consumption is given by: MUC = ∂U ∂C = 1 C and his marginal utility from leisure is given by: MUL...
) Bob is deciding how much labour he should supply. He gets utility from consumption of...
) Bob is deciding how much labour he should supply. He gets utility from consumption of beer (given by C) and from leisure time (given by L), which he spends hanging out with his friend Doug. This utility is given by the following utility function: U(C, L) = ln(C) + θ ln(L) where the value of θ was determined by your student number and ln(C) denotes the natural logarithm of consumption etc. Given this utility function, Bob’s marginal utility from...
Bob is deciding how much labour he should supply. He gets utility from consumption of beer...
Bob is deciding how much labour he should supply. He gets utility from consumption of beer (given by C) and from leisure time (given by L), which he spends hanging out with his friend Doug. This utility is given by the following utility function: U(C, L) = ln(C) + θ ln(L) where the value of θ was determined by your student number and ln(C) denotes the natural logarithm of consumption etc. Given this utility function, Bob’s marginal utility from consumption...
3. Assume there is a constant per unit opportunity cost of Consumption (call it "Saving"). If an individual wants to maximize his net utility (minus opportunity cost), set up the math problem he would solve. Use the utility function from problem 2. Utilit U(C) =-Ca, where C is consumption. y
Question 1. (Consumption-Saving Problem): Suppose that a consumer lives for two periods. The utility function of the consumer is given by with u> 0 where c and c2 are consumption in period 1 and period 2 respectively. Sup- pose that consumer has income y in the first period, but has no income in the second period. Consumer has to save in the first period in order to consume in the second period. Let s be the savings in the first...
Question 1. (Consumption-Saving Problem): Suppose that a consumer lives for two periods. The utility function of the consumer is given by with u> 0 where c and c2 are consumption in period 1 and period 2 respectively. Sup- pose that consumer has income y in the first period, but has no income in the second period. Consumer has to save in the first period in order to consume in the second period. Let s be the savings in the first...
1. Consider an agent who values consumption in period 0 and 1 according to the following utility function: u(co, C)In(Co)+8 In(c1) is a discount factor (5 < 1) which indicates that the agnet prefers to consume today more than he can tomorrow. Suppose that the agent is given a total wealth today of w and that he may save any portion of this money in order to consume tomorrow. If he saves money he is paid interest r. Thus the...
Please give a detailed
solution, thank you!
4. Two consumers (call them A and B) have utility functions over consumption in period 1 and consumption in period 2 given by U (1,C2)n(c)ln(c2) In period 1, consumer A receives income of y 2, the endowments are reversed, consumer A gets y= 120 and consumer B gets y = 80 80 and consumer B receives y? = 120. In period (so they just a. First assume consumers are not allowed to save...
Question 1: Households A household's utility over consumption C and leisure l is U - U(C,0) Cl 1. Plot the household's indifference curve for U-80 for values of C andlless than 20 (i.e. find the curve containing all combinations of C and ( such that U(C, 0) 80) The household has a time endowment of h=16 hours per day. The wage rate per hour is w 1.25. The household's labour income is therefore wNs, where N-h-l-16- l is the time...
5. John Paul derives utility from the consumption of cigars and brandy on friday evenings. His utility from c cigars and b glasses of brandy is given by: (a) First find Uc. Interpret you answer: What does your answer mean to J.P? b) Suppose cost or money is not a problem for J.P. How many cigars and glasses of brandy will he consume on a friday evening? Verify that your answer indeed maximizes U Hint: Hessian (c) Continue to assume...
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