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Please check the image for the question, thanks! 3 (25 pts) A student wants do decide about taking or not next year a one year

Please check the image for the question, thanks!

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3 (25 pts) A student wants do decide about taking or not next year a one year Master at EU. This student has an interternporal utility function U(C'1, 0'2) in which consumption this year Cl and consumption next year Cg are imperfect substitutes. Also has a current part time work who is going to give her, with her current skills, Y1 and Y2 repectively. a. (10 pts) If the student decides no, you can take 02 = [Y1 C1)(1 +r')+Y2 as her intertemporal budget restriction. Graph it, give the value of the in- tercepts explaining them, and depict a hypothetical equilibrium with approxi- mately equal consumption both years. b. (10 pts) If the student decides to take the master has to pay it today an amount F to be substracted from the income Y1. She knows, however, that her master will allow to have double income 2Y2 next year. The extra gain Y2 is considerably greater than the master fee F (and r is very small, say) . Graph the new intertemporal budget restriction and a new hypothetical equilibium. c. (5 pts) Which decision will provide her a higher level of satisfaction

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