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Consider a consumer that lives only two periods and leaves no money behind. This consumer likes consumption (composite good) in both periods. The utility function
Consider a consumer that lives only two periods and leaves no money behind. This consumer likes consumption (composite good) in both periods. The utility function is:
U=c0 *c1 ,MU0=c1 ,MU1 =c0
In period 0, the consumer's income is M0 = 20,000 and in period 1, the consumer's income is M1 = 5,000. The interest rate at which the consumer can borrow and lend money is 10%. What is the consumer's optimal consumption bundle borrowing or saving decision without a public pension?
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