Question
when considering intertemporal chioce, consumers can save at the interest rate r and also save at the same rate r. Now, lets consider the intermediate
when considering intertemporal chioce, consumers can save at the interest rate r and also save at the same rate r.
Now, lets consider the intermediate scenario where :
there are 2 periods: period 1 and period 2
consumer gets endownment of y1 in period 1 and y2 in period 2
consumption levels c1 and c2 in period 1 and 2
consumer can save at the rate rs and borrow at rb where rs< rb
Q) in the case in which consumer consumes more than income in period 1, what is his budget constraint? what is the budget constraints in both periods and using the 2 budgets constraints to derive, what is the lifetime budget constraint?
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