can anyone help me with this question? 2. An review of intertemporal optimization: Suppose a consumer's utility function is given by U(c,2) where ci is consumption in period 1 and ca is consum...
Question 3 John has the utility function is u(ci,C2) -c2, where c, is consumption today and c2 is consumption tomorrow. The price of consumption today is £1 and the price of consumption tomorrow is p2. John gets an income of m, today and m2 tomorrow. (a) John also faces the interest rate, r. Write out John's intertemporal budget constraint in present value and future forms. (4 marks) (b) It turns out that John earns an income of £15000 today and...
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...
Question 1. Suppose Kala's utility function is a function of consumption c, with U = 150-102 Her income is 6. What is the expected value of a gamble where she wins 4 with probability 75% and loses 4 with probability 25%? Would Kala take this gamble? Question 3. Laura is deciding how much to consume in periods o, 1 and 2. Suppose Laura's income in period o is o, her income in period 1 is y, and her income in...
Question 1. Suppose Kala's utility function is a function of consumption, with U = 150 cm Her income is 6. What is the expected value of a gamble where she wins 4 with probability 75% and loses 4 with probability 25%? Would Kala take this gamble? Question 2. What is the present value of $100 in two years, if the yearly interest rate is 7%? Question 3. Laura is deciding how much to consume in periods o, 1, and 2....
Question 1. (Consumption-Saving Problem): Suppose that a consumer lives for two periods. The utility function of the consumer is given by 1-1 1-1 with μ > 0 where c1 and c2 are consumption in period 1 and period 2 respectively (Portfolio Choice Problem) Now suppose that the consumer can save in terms of two instruments: financial savings (s) and capital investment (k). Capital investment done in period 1 yields output ka with 0 < α < 1 in period 2....
1. Suppose you are given the utility function: VC U = vc + 1.10 CI уг and the budget constraint: c+ =yt 1+r 1+r where y = 5, y' = 10, and the interest rate r = 0.10. Now suppose that y=5 again, and there is only one consumer in the entire economy. If we add in government expenditures and taxation, the consumer's budget constraint is now: c+ y' = y + -t- +r 1+r 1+r If current and future...
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,...
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...
Suppose Alice's utility for Vegemite and other consumption is given by U(q,c)=24 log(q +1)+c, where q is Alice's consumption of Vegemite, and c is the level of Alice's other consumption. Nor- malize the price of other consumption to land let p denote the price of Vegemite. Assume Alice's income I is larger than 24. (a) What is Alice's optimal consumption of Vegemite? [Hint: Note that Alice does have a choke price. You will need this in the next part.] (b)...