Jerry is saving to retire from the Pawnee Department of Parks and Recreation. He earns a wage and has existing savings of . Let 1 and 2 denote consumption while working and in retirement. To save for retirement, Jerry will invest his existing savings and any leftover wages in Tom's business, Entertainment 720. Jerry expects to receive a rate of return of .

1. What is Jerry's budget constraint?

Jerrys Utility Function is (1,2)=log1+ log2

2. How much will Jerry consume while working and in retirement?

3. For what values of and will Jerry consume more in retirement than while working?

Tom's business partner Jean-Ralphio makes a number of poor business decisions, reducing the rate of return to .

4. On a single graph, show how this change in the rate of return alters Jerry's budget constraint and consumption.