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Lifetime budget constraint: c 1 + c 2 /1+r = w 1 (1- l 1 ) + w 2 (1- l 2 )/1+r c 2
Lifetime budget constraint: c1 + c2/1+r = w1(1-l1) + w2(1-l2)/1+r
c2 = c1+1/ (1+r)
l1 = 1/w1 - 1/c1
l2 = 2/w2 - 1/c2
Solve for the optimal values (c1*,c2*, l1*,l2*)
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Microeconomics
Authors: Christopher T.S. Ragan, Richard G Lipsey
14th canadian Edition
321866347, 978-0321866349
