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ECO - In the two-period consumption model, suppose that Y1 = 100 and Y2 = 210

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Question;In the two-period consumption model, suppose that Y1 = 100 and Y2 = 210. There is no initial wealth. If the utility function of the individual is U = log(C1) +.9 log(C2) and the interest rate is 5%, what are C1 and C2? How would your answer change if U = log(C1) + log(C2)? Explain in words why the change would happen

 

Paper#57421 | Written in 18-Jul-2015

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