Your income for this year is $50,000 and expect it will increase by 20% next year. a) Assume the interest rate is 20%. D...
Your income for this year is $50,000 and expect it will increase by 20% next year.
a) Assume the interest rate is 20%. Draw budget constraint. Please indicate the slope, intercepts and the endowment point.
b) Suppose you plan to consume $60,000 this summer, what is your consumption bundle? Do you borrow or save?
c) Based on b), now suppose that you have found a new investment opportunity that will get you a higher annual return. Draw the new BC. Do you think you will save (or borrow) more or less?
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Your income for this year is $50,000 and expect it will increase by 20% next year. a) Assume the interest rate is 20%. D...
4. Your income for this year is $50,000 and expect it will increase by 20% next...
4. Your income for this year is $50,000 and expect it will increase by 20% next year. . a) Assume the interest rate is 20%. Draw budget constraint. Please indicate the slope, intercepts and the endowment point. b) Suppose you plan to consume $60,000 this summer, what is your consumption bundle? Do you borrow or save? c) Based on b), now suppose that you have found a new investment opportunity that will get you a higher annual return. Draw the...
Suppose you earn $10,000 this summer and expect to earn $20,000 next summer. The interest rate...
Suppose you earn $10,000 this summer and expect to earn $20,000 next summer. The interest rate is 10%. (You don't have to submit a graph) a) Write down the slope of the budget constraint, horizontal intercept, vertical intercept and the X-Y coordinates for the endowment. b) Write your intertemporal budget constraint in the equation. c) With the same incomes, now suppose the bank pays you an interest rate of 10% on anything you save but will lend you money only...
Christopher has an income of K200 this year and he expects an income of K110 next year. He can borrow and lend money at an interest rate of 10%. Consumption goods cost K1 and there is no inflation....
Christopher has an income of K200 this year and he expects an income of K110 next year. He can borrow and lend money at an interest rate of 10%. Consumption goods cost K1 and there is no inflation. What is the present value of Christopher’s endowment? What is the future value of Christopher’s endowment? Suppose that Christopher has the utility function U =C1C2. Write down Christopher’s marginal rate of substitution. Set this slope equal to the slope of the budget...
12 PTS] Suppose you have an income of $200 this year and you expect an income of $110 next year. ...
12 PTS] Suppose you have an income of $200 this year and you expect an income of $110 next year. You can borrow and lend money at an interest rate of 10%. Consumption goods cost $1 and there is no inflation. (a) 13 PTs] Write the present value and the future value of your endowment? Show your budget set on the (b) 13 PTs] Suppose that you have the utility function U . Find analytically your optimal choice and graph....
Buzz is a chicken farmer. His earnings will be $100 this year and $100 next year....
Buzz is a chicken farmer. His earnings will be $100 this year and $100 next year. He can lend money at an interest rate of 20%. Because of a subsidized loan program for chicken farmers, he can borrow money at an interest rate of 10%. No matter what he borrows or lends, his earnings will still be $100 each year. a. If he is not allowed to either borrow or lend, draw a graph showing his budget between consumption this...
4. Suppose that doctors’ visits cost $20, and consumers each have an income of $100. Consumers...
4. Suppose that doctors’ visits cost $20, and consumers each have an income of $100. Consumers spend all their income on doctors’ visits and a “composite good” that costs $1 per unit. (3 points each) a. Draw a graph to illustrate a consumer’s budget constraint. Put doctors’ visits on the horizontal axis, and be sure to illustrate the horizontal and vertical intercepts. (You can assume that doctors’ visits are perfectly divisible.) b. Suppose the local government is considering two health...
12. Savings decisions Charles is a Nobel laureate who teaches economics at a university where he...
12. Savings decisions Charles is a Nobel laureate who teaches economics at a university where he is paid a yearly salary of $160,000. He plans to take the next year off to write a book, so he won't earn any money next year. He is currently trying to figure out how much of this year's salary he should save for next year. Disregard any tax considerations, and disregard what happens after next year. In other words, assume that next year,...
Consider the typical example of shopping at Walmart for pants (x1) and shirts (x2). Your income...
Consider the typical example of shopping at Walmart for pants (x1) and shirts (x2). Your income endowment is $300; the price of shirts is $20, and the price of pants is $30 a) Write down a Cobb-Douglas utility function with exponents a=0.5 and 1-a=0.5. b) Write down the budget constraint for this problem. c) Set up the Lagrange and find the optimal consumption bundle for Xi and x2 (call this bundle A) d) Now assume that the price of pants...
ECN 312 help! A-D 2. (25) Rebecca is just starting a two-day, fully-funded vacation. First thing...
ECN 312 help! A-D
2. (25) Rebecca is just starting a two-day, fully-funded vacation. First thing this morning, she is given S1000. First thing tomorrow morning, she is given S500. This is all the money that Rebecca has access to. Rebecca has no access to credit and cannot borrow money. She can, however, save her money overnight in a savings account that pays 10% interest per day. She will spe nd all of her money while on vacation. (a) (5)...
ds of dollars) + 12. Savings decisions Eric is a Nobel laureate who teaches physics at...
ds of dollars) + 12. Savings decisions Eric is a Nobel laureate who teaches physics at a university where he is paid a yearly salary of $80,000. He plans to take the next year off to write a book, so he won't earn any money next year. He is currently trying to figure out how much of this year's salary he should save for next year. Disregard any tax considerations, and disregard what happens after next year. In other words,...
Suppose you earn $10,000 this summer and expect to earn $20,000 next summer. The interest rate is 10%. (You don't have to submit a graph) a) Write down the slope of the budget constraint, horizontal intercept, vertical intercept and the X-Y coordinates for the endowment. b) Write your intertemporal budget constraint in the equation. c) With the same incomes, now suppose the bank pays you an interest rate of 10% on anything you save but will lend you money only...
12 PTS] Suppose you have an income of $200 this year and you expect an income of $110 next year. You can borrow and lend money at an interest rate of 10%. Consumption goods cost $1 and there is no inflation. (a) 13 PTs] Write the present value and the future value of your endowment? Show your budget set on the (b) 13 PTs] Suppose that you have the utility function U . Find analytically your optimal choice and graph....
Buzz is a chicken farmer. His earnings will be $100 this year and $100 next year. He can lend money at an interest rate of 20%. Because of a subsidized loan program for chicken farmers, he can borrow money at an interest rate of 10%. No matter what he borrows or lends, his earnings will still be $100 each year. a. If he is not allowed to either borrow or lend, draw a graph showing his budget between consumption this...
12. Savings decisions Charles is a Nobel laureate who teaches economics at a university where he is paid a yearly salary of $160,000. He plans to take the next year off to write a book, so he won't earn any money next year. He is currently trying to figure out how much of this year's salary he should save for next year. Disregard any tax considerations, and disregard what happens after next year. In other words, assume that next year,...
Consider the typical example of shopping at Walmart for pants (x1) and shirts (x2). Your income endowment is $300; the price of shirts is $20, and the price of pants is $30 a) Write down a Cobb-Douglas utility function with exponents a=0.5 and 1-a=0.5. b) Write down the budget constraint for this problem. c) Set up the Lagrange and find the optimal consumption bundle for Xi and x2 (call this bundle A) d) Now assume that the price of pants...
ECN 312 help! A-D
2. (25) Rebecca is just starting a two-day, fully-funded vacation. First thing this morning, she is given S1000. First thing tomorrow morning, she is given S500. This is all the money that Rebecca has access to. Rebecca has no access to credit and cannot borrow money. She can, however, save her money overnight in a savings account that pays 10% interest per day. She will spe nd all of her money while on vacation. (a) (5)...
ds of dollars) + 12. Savings decisions Eric is a Nobel laureate who teaches physics at a university where he is paid a yearly salary of $80,000. He plans to take the next year off to write a book, so he won't earn any money next year. He is currently trying to figure out how much of this year's salary he should save for next year. Disregard any tax considerations, and disregard what happens after next year. In other words,...
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