Question
Intertemporal optimizing: An agent is living in two different periods of time. She works in the first period and is retired in the second. The
Intertemporal optimizing:
An agent is living in two different periods of time. She works in the first period and is retired in the second. The in income in period 1 is w1>0 and the income in period 2 is w2. The utility function is given by u=log(c1)+Blog(c2). Where c1 is consumption in the first periode and c2 is consumption in the second period.
a. How is B interpereted and what is a fair assumption?
The agent can lend and save to the interest rate i.
b. What is the consumers intertemporal budget condition?
c. Draw the budget condition.
d. What is the optimal savings for the consumer.
My question is regarding d. I think i have looked a bit to long at this and can no longer see what is probably an obvious solution. I have answered a, b and c. Any good tips?
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