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Our consumer has a business opportunity. If she invests 100 dollars in the current period, it will be worth x dollars in the future period.
Our consumer has a business opportunity. If she invests 100 dollars in the current period, it will be worthxdollars in the future period. This would lower her current income to 120 - 100 = 20 dollars but would increase her future income to 0 +xdollars. Clearly she will need to borrow. The interest rate for borrowing is 125% so 1 + r = 2.25. Calculate the minimum amountx= _______ that she would have to earn to before she would undertake this opportunity.Hint: This has similarities to a Hicksian CV.
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