Brook has no job and no wealth. However, they know that they will inherit £50,000 inthe future. Brook has no awareness of the concepts of interest rates or inflation, butthey know they can borrow or lend money. Brook needs to decide how much theywill consume today, c₁ and in the future, c2.(a) Sketch the budget line that Brook believes they will face. Ensure that you markthe endowment point.(b) Write the budget equation that Brook believes they will face.Given that Brook has the utility function:u = 10c1 + 9c2.Is Brook planning to be a saver of a borrower?

Part (a): Sketch the Budget LineBrook will inherit £50,000 in the future (let's call this t=2). They…

Answered: Brook has no job and no wealth.…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Let's incorporate the labor-leisure trade-off and capital income taxes in the two-period model. Let c₁, c₂ be consumption in two periods, I the number of hours worked, Te Te the proportional taxes on consumption in 2 periods, s the saving rate, w the wage rate, b pension in the 2nd period, and 7, the tax on savings (capital income tax). The household's maximization problem in this case is: given by maxe₁,e2,8,1-1 log(c₁) + log (1-1)+5log (c₂) such that (1+T₂) C₁+8 = (1-7)wl and (1+T₂)C₂ = [1+r(1-Ts)]s+b, where measures how the household values leisure vis-a-vis consumption.
Assume you can work as many hours you wish at £12 per hour (net of tax). If you do not work, you have no income. You have no ability to borrow or lend, so your consumption, c, is simply equal to your income. Derive and plot the feasible set, between daily values of consumption c, and “leisure”, l. Label the values at the intercepts (the points where the feasible frontier cuts the two axes).
QUESTION THREE A UPSA student decides to spend his income on any of these four items - pay tuition fees, pay hostel fees, buy foodstuffs, buy a laptop, and buy a gift for a friend. The market price and the student's expected monetary values or benefits placed on the items are, respectively, presented in the table below. Benefit GH¢ 1,410 1,380 1,480 1,510 1,450 Item Direct cost GH¢ Tuition Hostel 950 950 Food 950 Laptop Gift 950 950 A. Suppose the student has GH¢ 950.00 to spend on one of the five items. From your results in (A), i. Find the opportunity cost of each item. ii. Compute the net benefit of each item using the respective direct cost. iii. . Compute the net benefit of each item using the respective opportunity cost. iv. iv. From your results in (ii), which item should the student pay for? Explain your answer.
1. Consider a two-period model in which you work and save in the initial period (period 0) and live off savings and the interest from savings in retirement (period 1). Suppose that income in period 0 is $250,000, income in period 1 is $0, and the interest rate is 50%. a. Draw the budget line. b. Draw an indifference curve consistent with a person whose preferences causes them to equalize their consumption in period 0 and period 1. c. Savings are $_ d. Draw the after-tax budget line if a personal income tax is introduced with a marginal tax rate of t= 40%. e. Suppose that preferences are such that after tax consumption is equalized in period 0 and period 1. On the diagram show after-tax savings. Сі ($x 1,000) 450 400 350 300 250 200 150 100 50 25 50 75 100 125 150 175 200 225 250 275 300 325 350 Со ($ x 1,000)
The Australian Government in the 2015-16 financial year is set to spend $31.9 billion dollars on national defence. There is talk that some of this money will go towards building submarines in South Australia, generating thousands of jobs for South Australia. Kevin is complaining to Henry that this is an inefficient use of money as no individual Australian values national defence at that level and that the spending is just to ensure government politicians get re-elected. There can be multiple answers for this, not just the one.
Note:- Please don't simply copy and paste content from other AI tools or bots, or else I may have to downvote your actions. Do not provide the handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.Answer completely.
Q1) It is highly likely that the projected retirement income based on the replacement ratio method may not be sufficient to pay for retirement expenses if inflation rates are _________ wage growth rates. Q2) Which of the following statements is false? a. If there are changes to an individual’s circumstances, the retirement plan should be reviewed. b. When developing a retirement plan, one should ensure that he has contingency funds and sufficient insurance protection. c. To better achieve one’s retirement funding objectives, the funding plan should not be modified under any circumstances. d. Regular reviews on the plan should be conducted to ensure that the retirement funding objectives are met. Q3) Mr. Clifton Chen, aged 39, recently purchased an endowment plan from an insurer that requires him to set aside $25,000 per year for the next 23 years till he retires at age 62. The first premium payment occurs at the beginning of the period. Assuming an inflation rate of 2% and an…
a, b and c
The consumer views present and future consumption as perfect complements and would like to consume equal amounts in both periods, i.e., . Suppose, however, that there is a credit market imperfection that prevents this consumer from borrowing at all, i.e., . a. Show the consumer's lifetime budget constraint and indifference curves on a diagram. Note that because the consumer prefers to purchase present and future consumption in equal amounts, the indifference curves will be kinked at. Note also that because the consumer cannot borrow, the budget constraint will be kinked at the consumer's initial endowment. Recall that the budget constraint is given by: Recall also that the consumer's endowment for each period can be expressed as: b. Calculate the consumer's optimal current-period and future-period consumption and optimal saving and show this in your diagram. Does the existence of the credit market imperfection affect the consumer's choices? Recall that savings is given by: c. Suppose…

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