Please no written by hand solutions 2. (Consumption and savings)Consider an economic agent who is going to live for two periods. For each period, his utilityfunction is:{{His current income is yo = 1000, risk-free rater and discount factor ó are equal to zero.How much will this agent save at time - 0:un (₁)if & ≤ 1000500+ if > 1000Cta) if y1000 with certainty;b) if y800 with certainty;c) if y = 1200 with certainty;d) if y, is a random variable: = 800 with probability 1/2, or 1200 with probability 1/2?Does he make precautionary savings?

Utility functionWhen Ct≤1000U=CtWhen Ct≥1000U=500+0.5*CtY0=1000risk free return= r

Consider an economic agent who is going to live for two periods. For each period, his utility function is: u₂ (₁) { 1000 with certainty; b) if u 800 with certainty; C₁ if ≤ 1000 500+ if > 1000 } His current income is yo = 1000, risk-free rate r and discount factor & are equal to zero. How much will this agent save at time 0:

Consider an economic agent who is going to live for two periods. For each period, his utility function is: u₂ (₁) { 1000 with certainty; b) if u 800 with certainty; C₁ if ≤ 1000 500+ if > 1000 } His current income is yo = 1000, risk-free rate r and discount factor & are equal to zero. How much will this agent save at time 0:

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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