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ECO - Derive the optimal comsumption ratio C2/C1

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Question

Question;2-priod model. household utility: U(C1,C2)=ln C1 + ln C2C1+S1=Y1 period1C2 = Y2+(1+i1)S1-T2 period2T2=Ts(1+i1)S1Derive the optimal comsumption ratio C2/C1 showing how it depends on the tax rate on savings. Nmaely what happens wht Ts increases.

 

Paper#57638 | Written in 18-Jul-2015

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