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Neoclassical consumption model Consider the two-period Neoclassical consumption model seen in class. Suppose that income is measured in dollars. Let the utility function take the
Neoclassical consumption model Consider the two-period Neoclassical consumption model seen in class. Suppose that income is measured in dollars. Let the utility function take the logarithmic form U(C)=ln C, and the representative consumer maximize her lifetime utility subject to her budget constraint. Suppose that income in period 1 is $50,000, income in period 2 is $30,000, =1 and =5%. Do you think that the consumption profile of the agent in this numerical example is going to be smoother than her income? If so, why? If not, why not? Please explain as clearly as you can
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