Question:

Suppose that an economy is made up of two types of households: poor and rich. There are Np poor households with period two income 3;; , and N R rich households with period two income 3,13 = kyg, where k > 1. Both types of households have the same period one income, yl, and the same utility function dened as follows: U(c1, C2) = ln(c1) + B17402) where c1 and C2 denote period one and two consumption, respectively, and ,6