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Harvey Habit has a utility function U(c1, c2) = min(c1, c2) where c1 and c2 are his consumption in periods 1 and 2 respectively. Harvey
Harvey Habit has a utility function U(c1, c2) = min(c1, c2) where c1 and c2 are his consumption in periods 1 and 2 respectively. Harvey earns $189 in period 1 and he will earn $63 in period 2. Harvey can borrow or lend at an interest rate of 10%. There is no inflation. (Please Show work or explain. I already have the answer, just don't know how to get it )
(a) Harvey will save 60.
(b) Harvey will borrow 60.
(c) Harvey will neither borrow nor lend.
(d) Harvey will save 124.
(e) None of the above.
Could you help me?
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