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1. Amina has the utility function U(c1,c2) = 635 + 0.9cg'5 where c1 and (:2 are her consumption in periods 1 and 2, respectively. She
1. Amina has the utility function U(c1,c2) = 635 + 0.9cg'5 where c1 and (:2 are her consumption in periods 1 and 2, respectively. She will earn $200 in period 1 and $220 in period 2. She can borrow or save at an interest rate of 10% and the price of the consumption good is $1 in each period. a. Draw her budget line on a graph. [4pts] (Note: Make sure to label everything clearly, including the equation for her budget line and intercepts). b. Solve for her optimal level of consumption in each period. Is she a saver or borrower? Add an indifference curve that depicts her optimal choice to your diagram from part(b). [4pts] C. Is it fair to say that Amina values future consumption more than current consumption? Briefly, explain your reasoning. [2pts]
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