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2. Suppose Tony is deciding on buying an expensive road bike. There are three periods: Period...
I need help with this problem ECON 402 HW 4 Page 3 5 Durable Goods (30...
I need help with this
problem
ECON 402 HW 4 Page 3 5 Durable Goods (30 points) Tony is a seller of goods that last at most two periods. There are three potential customers, H and L and L2, cach of whom wants at most one good. The respective utilities (in money units) they get are in the table below. H L1, L2 Period 1 1200 500 Period 2 500 200 So if H, say, buys in the first round,...
An Individual lives for two periods, 1 and 2. In the first he works and earn...
An Individual lives for two periods, 1 and 2. In the first he works and earn an income of M. In the second he is retired and has no income His/her life time utility is a function of how much he consumes in the two periods. Cydenotes consumption in period 1 and 2 consumption in period 2. (Hint: If you want to, you can view and treat C and C2 as any pair of "goods", eg, good x and y)....
Question 4. Laura is deciding how much to consume in periods o, 1 and 2. Suppose Laura income in period o is o, her...
Question 4. Laura is deciding how much to consume in periods o, 1 and 2. Suppose Laura income in period o is o, her income in period is y, and her income in period alsay. The price of consumption in period / is p. Assuming the interest rate is T, and consumption in period is denoted. In the utility maximization problem what variables are endogenous and which are exogenous ? Figure 1. Consider the following diagram of an indifference curve...
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...
1. Consider an Arrow-Debreu model with 2 periods (1 and 2) and 2 states of the world (1 and 2) in period 2. The home agent has income Y1 = 0, Y2(1) 200, Y2(2) = 50; the probabilities for the differen...
1. Consider an Arrow-Debreu model with 2 periods (1 and 2) and 2 states of the world (1 and 2) in period 2. The home agent has income Y1 = 0, Y2(1) 200, Y2(2) = 50; the probabilities for the different states are π(1) and π(2) = 름 . Th = 100,坋(1) 0,坋(2) = 0; the probabilities for the different states are (1)and *(2) foreign agents have utility function: Ui In(G) +r(1) In(C (1)) + π(2) In(C(2)). Further assume that...
A nonrenewable resource stock of 200 units Two periods Demand in the first period (period 0)...
A nonrenewable resource stock of 200 units Two periods Demand in the first period (period 0) is p 0 =300-q 0 Demand in the second period (period 1) is p 1 =400-2q The marginal extraction cost is zero. Competitive industry, profit maximizing firms 1 a. Draw the 2-period graph for this case. On your graph, label the values of all vertical intercepts for the two demand curves (1 pt.) b. State the value of the quantity that would be extracted...
5. A consumer who lives for two periods has a standard Cobb-Douglas utility func- tion: u(C1,C2)...
5. A consumer who lives for two periods has a standard Cobb-Douglas utility func- tion: u(C1,C2) = ccm where ct = consumption in period t and a + b = 1. Her income in period one is 11 = 500 and 12 = 400, and she can lend or borrow at interest rate r = 0.2. (a) Find the optimal consumption demand. (b) What values of a, if any, makes the consumer a borrower? Interpret this result. (c) Suppose now...
Problem 1 (2.5 marks). Suppose there are only two time periods, today (period 1) and tomorrow...
Problem 1 (2.5 marks). Suppose there are only two time periods, today (period 1) and tomorrow (period 2), and only one consumption good, let's call it food. Assume that food is a perfectly divisible good. Let ci and c2 denote the amount of food consumed today and tomorrow, respectively. Note that here we use subscripts to denote time periods. The price of food today is equal to Pi = P, but as the rate of inflation is > 0, the...
1. Consider an economy that exists for 3 periods: period 1, period 2 and period 3....
1. Consider an economy that exists for 3 periods: period 1, period 2 and period 3. In each case the government must satisfy the budget constraint: Be+1 = (1 + i)B,+G -T; (a) Write this budget constraint for each period. (b) What must be true for B.? (c) Using the results from part (b), solve the period 3 budget constraint for B3 and substitute this back into the period 2 constraint. (d) Solve this new version of the period 2...
Suppose we are in a two-period environment where the representative consumer has a utilit;y function of...
Suppose we are in a two-period environment where the representative consumer has a utilit;y function of the form: Let the discount factor, β , represent the idea that the consumer values consumption at the future with some weight less than 1. Let initial assets, a 0 and the households income in the two periods be given as y,-5, y,-10. The real interest rate in this economy, r is equal to .1 (ie 10% return on any wealth saved). 1. Intuitively,...
I need help with this
problem
ECON 402 HW 4 Page 3 5 Durable Goods (30 points) Tony is a seller of goods that last at most two periods. There are three potential customers, H and L and L2, cach of whom wants at most one good. The respective utilities (in money units) they get are in the table below. H L1, L2 Period 1 1200 500 Period 2 500 200 So if H, say, buys in the first round,...
An Individual lives for two periods, 1 and 2. In the first he works and earn an income of M. In the second he is retired and has no income His/her life time utility is a function of how much he consumes in the two periods. Cydenotes consumption in period 1 and 2 consumption in period 2. (Hint: If you want to, you can view and treat C and C2 as any pair of "goods", eg, good x and y)....
Question 4. Laura is deciding how much to consume in periods o, 1 and 2. Suppose Laura income in period o is o, her income in period is y, and her income in period alsay. The price of consumption in period / is p. Assuming the interest rate is T, and consumption in period is denoted. In the utility maximization problem what variables are endogenous and which are exogenous ? Figure 1. Consider the following diagram of an indifference curve...
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...
1. Consider an Arrow-Debreu model with 2 periods (1 and 2) and 2 states of the world (1 and 2) in period 2. The home agent has income Y1 = 0, Y2(1) 200, Y2(2) = 50; the probabilities for the different states are π(1) and π(2) = 름 . Th = 100,坋(1) 0,坋(2) = 0; the probabilities for the different states are (1)and *(2) foreign agents have utility function: Ui In(G) +r(1) In(C (1)) + π(2) In(C(2)). Further assume that...
5. A consumer who lives for two periods has a standard Cobb-Douglas utility func- tion: u(C1,C2) = ccm where ct = consumption in period t and a + b = 1. Her income in period one is 11 = 500 and 12 = 400, and she can lend or borrow at interest rate r = 0.2. (a) Find the optimal consumption demand. (b) What values of a, if any, makes the consumer a borrower? Interpret this result. (c) Suppose now...
Problem 1 (2.5 marks). Suppose there are only two time periods, today (period 1) and tomorrow (period 2), and only one consumption good, let's call it food. Assume that food is a perfectly divisible good. Let ci and c2 denote the amount of food consumed today and tomorrow, respectively. Note that here we use subscripts to denote time periods. The price of food today is equal to Pi = P, but as the rate of inflation is > 0, the...
1. Consider an economy that exists for 3 periods: period 1, period 2 and period 3. In each case the government must satisfy the budget constraint: Be+1 = (1 + i)B,+G -T; (a) Write this budget constraint for each period. (b) What must be true for B.? (c) Using the results from part (b), solve the period 3 budget constraint for B3 and substitute this back into the period 2 constraint. (d) Solve this new version of the period 2...
Suppose we are in a two-period environment where the representative consumer has a utilit;y function of the form: Let the discount factor, β , represent the idea that the consumer values consumption at the future with some weight less than 1. Let initial assets, a 0 and the households income in the two periods be given as y,-5, y,-10. The real interest rate in this economy, r is equal to .1 (ie 10% return on any wealth saved). 1. Intuitively,...
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