4. Madeleine is a high school graduate deciding whether to go to university. She (like everyone else) lives for two periods after high school. In the first period, she can work (without university) for a salary of YH, or she can attend university. If she attends university, she must pay $5,000 in fees (tuition, books), but she will also earn $5,000 from a summer job. In the second period, she will continue to earn Y, if she did not attend university, or she will earn Yu if she went to university. The interest rate at which money can be borrowed or invested is r. Show that she will attend university if: Yu > (2+r)YH Explain how an increase in the interest rate will affect her decision to attend university.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question
4. Madeleine is a high school graduate deciding whether to go to university. She (like everyone
else) lives for two periods after high school. In the first period, she can work (without
university) for a salary of YH, or she can attend university. If she attends university, she must
pay $5,000 in fees (tuition, books), but she will also earn $5,000 from a summer job. In the
second period, she will continue to earn Y, if she did not attend university, or she will earn Yu
if she went to university. The interest rate at which money can be borrowed or invested is r.
Show that she will attend university if:
Yu > (2+r)YH
Explain how an increase in the interest rate will affect her decision to attend university.
Transcribed Image Text:4. Madeleine is a high school graduate deciding whether to go to university. She (like everyone else) lives for two periods after high school. In the first period, she can work (without university) for a salary of YH, or she can attend university. If she attends university, she must pay $5,000 in fees (tuition, books), but she will also earn $5,000 from a summer job. In the second period, she will continue to earn Y, if she did not attend university, or she will earn Yu if she went to university. The interest rate at which money can be borrowed or invested is r. Show that she will attend university if: Yu > (2+r)YH Explain how an increase in the interest rate will affect her decision to attend university.
Expert Solution
steps

Step by step

Solved in 2 steps with 1 images

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
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)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
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-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education