not use ai please A player has $100 today that he needs to consume in the next three periods, t = 1, 2, 3. The utility ofconsuming Sxt in period t is given by the utility function u(x) = In(x), and in period t = 1 the player values his netpresent value of all consumption as u(x1) + \delta u(x2) + \delta 2u(x3), where \delta = 0.9.a. How does the player plan to spend the $100 over the three consumption periods?b. Imagine that the player knows that in period t = 2 he will receive an additional gift of $20. How will he choose toallocate his original $100 initially and how will he spend the additional $20?

Step 1: A budget constraint also demonstrates the quantities of goods and/or services that a…

Answered: A player has $100 today that he needs…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Please show your work. Thanks
Assume a consumer has current-period income y = 200, future-period income y′ = 150, current and future taxes t = 40 and t′ = 50, respectively, and faces a market real interest rate of r = 0.05, or 5% per period. The consumer would like to consume according to the following utility function: U (c, c′ ) = ln(c) + ln(c′ ). Show mathematically the lifetime budget constraint for this consumer. Find the optimal consumption in the current and future periods and optimal saving. Suppose that instead of r = 0.05 the interest rate is r = 0.1. Repeat parts (a) and (b). Does the substitution effect or the income effect dominate?
V*(p1, p2, 1) = True False P₁ P₂ 1² is a valid indirect utility function.
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Mats, who has reference-dependent preferences over beer and money, goes to the local pub with a friend, but is not planning on drinking any beer or spending any of his 50 Euro in cash. Let his end-of-evening outcomes in pints of beer consumed and cash be c1 and c2, respectively, and let his reference point in pints of beer and cash be r1 and r2, respectively. Then, Mats’ utility is given by v(6c1 − 6r1) + v(c2 − r2), where v(x) = x for x ≥ 0, and v(x) = 1.5x for x < 0. 1) Now suppose that after Mats gets his promo pint but before he decides whether to sell it, he notices that he lost 10 Euro on the way to the pub. He does not yet incorporate this 10 Euro loss into his reference point for cash. Calculate his selling price for the pint of beer. 2) Suppose that the pub advertises that it will have a 1 Euro/pint promotion. Thinking that this is worth it, Mats plans in advance to buy a pint, and incorporates this plan into his reference point. What is Mats’ reference point (r1, r2) in…
Mats, who has reference-dependent preferences over beer and money, goes to the local pub with a friend, but is not planning on drinking any beer or spending any of his 50 Euro in cash. Let his end-of-evening outcomes in pints of beer consumed and cash be c1 and c2, respectively, and let his reference point in pints of beer and cash be r1 and r2, respectively. Then, Mats’ utility is given by v(6c1 − 6r1) + v(c2 − r2), where v(x) = x for x ≥ 0, and v(x) = 1.5x for x < 0. (a) Suppose that the price of beer is pB. Calculate Mats’ utility from drinking one pint of beer at this price. What is Mats’ utility from drinking no beer? And, comparing these two utility values, what is the maximum price pB that Mats would pay for one beer? (b) Suppose that Mats unexpectedly gets a pint of beer as part of a promotion at the pub, and incorporates its consumption into his reference point in beer. [Hint: this means that (r1, r2) = (1, 50).] Suppose that Mats could sell the beer at a price pS.…

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