A consumer s preferences for consumption across two time periods c 1 and c 2 can
Fantastic news! We've Found the answer you've been seeking!
Question:
A consumers preferences for consumption across two time periods c and c can be represented by the utility function U C C C C The consumers endowment of income in each period is m m Assume that the price per Module of consumption is constant at p p and that there is no inflation between time periods. Income can initially be borrowed or lent between the two periods at an interest rate of r The interest rate then increases so that r
Calculate the optimal allocation of consumption between the two periods both before and after the change in the interest rate and comment on the consumers change in welfare.
Related Book For
Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba
Posted Date: