1. Choose and to maximize U(G,G) = ln ((c)ª¹ (¿)¹ ª³) for j=1,2 subject to: pie + ₂-pic-₂0. Let a¹ = .40, a² = .60, el = 8, e₂ = 6, e² = 14 and e² = 18. (a) Set up Lagrangian L = In ( (c)²¹ (2²₂) ¹ ª³ ) + x²][m²] + √₂ −mid – ½] for j = 1,2 (b) Take FOCs (c) Set X equal and find (pi) and (p₁) (d) Substitute (pi) and (f) Check MRS; (p1) into market clearing condition c + c = c + c² to find Pi (e) Using pi solve for optimal consumption DU (24) ad DU (22) 822 is the same for j = 1,2
1. Choose and to maximize U(G,G) = ln ((c)ª¹ (¿)¹ ª³) for j=1,2 subject to: pie + ₂-pic-₂0. Let a¹ = .40, a² = .60, el = 8, e₂ = 6, e² = 14 and e² = 18. (a) Set up Lagrangian L = In ( (c)²¹ (2²₂) ¹ ª³ ) + x²][m²] + √₂ −mid – ½] for j = 1,2 (b) Take FOCs (c) Set X equal and find (pi) and (p₁) (d) Substitute (pi) and (f) Check MRS; (p1) into market clearing condition c + c = c + c² to find Pi (e) Using pi solve for optimal consumption DU (24) ad DU (22) 822 is the same for j = 1,2
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
just a,b and c please! thank you
![1. Choose and to maximize
U(G,G) = ln ((c)ª¹ (¿)¹ ª³) for j=1,2
subject to: pie + ₂-pic-₂0. Let a¹ = .40, a² = .60, el = 8, e₂ = 6, e² = 14 and
e² = 18.
(a) Set up Lagrangian L = In
( (c)²¹ (2²₂) ¹ ª³ ) + x²][m²] + √₂ −mid – ½] for j = 1,2
(b) Take FOCs
(c) Set X equal and find (pi) and (p₁)
(d) Substitute (pi) and
(f) Check MRS;
(p1) into market clearing condition c + c = c + c² to find
Pi
(e) Using pi solve for optimal consumption
DU (24)
ad
DU (22)
822
is the same for j = 1,2](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1b2e65f2-c472-45bf-885c-00dffce84016%2Fade9af80-ca75-490a-aaa8-3950f40c06e0%2Flvc88yq_processed.png&w=3840&q=75)
Transcribed Image Text:1. Choose and to maximize
U(G,G) = ln ((c)ª¹ (¿)¹ ª³) for j=1,2
subject to: pie + ₂-pic-₂0. Let a¹ = .40, a² = .60, el = 8, e₂ = 6, e² = 14 and
e² = 18.
(a) Set up Lagrangian L = In
( (c)²¹ (2²₂) ¹ ª³ ) + x²][m²] + √₂ −mid – ½] for j = 1,2
(b) Take FOCs
(c) Set X equal and find (pi) and (p₁)
(d) Substitute (pi) and
(f) Check MRS;
(p1) into market clearing condition c + c = c + c² to find
Pi
(e) Using pi solve for optimal consumption
DU (24)
ad
DU (22)
822
is the same for j = 1,2
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 1 steps with 2 images
Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education