In an isolated peasant village, the only crop is corn. Good harvests alternate with bad harvests. This
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Question:
In an isolated peasant village, the only crop is corn. Good harvests alternate with bad harvests. This year the harvest will be 1,000 bushels. Next year it will be 150 bushels. There is no trade with the outside world. Corn can be stored, but rats will eat 25% of what is stored in a year. The villagers have the Cobb-Douglas utility function U(c1, c2) = c1c2, where c1 is consumption this year and c2 is consumption next year.
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