Consider the utility maximization problem of each young person: 1 0-1 1 0-10-1 max Cit, C2t.kt+1 a C1 + azc2t subject to Cit + kt+1 = wt C2t = (1+ re+1)k++1 Cit 2 0, C2t 2 0, kt+1 > 0 Derive the optimal value of ct. For this question, suppose that a1 = 1, az = 1, We = 2.1, re+1 = 0.21, and 0 = 1.5. Your answer must be presented as the numerical value (e.g., Cit = 1.5).

Advanced Engineering Mathematics
10th Edition
ISBN:9780470458365
Author:Erwin Kreyszig
Publisher:Erwin Kreyszig
Chapter2: Second-order Linear Odes
Section: Chapter Questions
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Consider the utility maximization problem of each young person:
1 Ө-1
1 0-10-1
+ a, C2t
max
Cit, C2t.kt+1
subject to
Cit + kt+1 = Wt
C2t = (1+ rt+1)kt+1
Cit 2 0, c2t 2 0, kį+1 2 0
Derive the optimal value of c1t. For this question, suppose that a1 = 1, az = 1,
W; = 2.1, r+1 = 0.21, and 0 = 1.5. Your answer must be presented as the numerical value (e.g.,
Cit = 1.5).
Derive the optimal value of c2t. For this question, suppose that a, = 2, a2 = v6,
W; = 1, rt+1 = 0.5, and 0 = 0.5. Your answer must be presented as the numerical value (e.g.,
C2t = 2).
Transcribed Image Text:Consider the utility maximization problem of each young person: 1 Ө-1 1 0-10-1 + a, C2t max Cit, C2t.kt+1 subject to Cit + kt+1 = Wt C2t = (1+ rt+1)kt+1 Cit 2 0, c2t 2 0, kį+1 2 0 Derive the optimal value of c1t. For this question, suppose that a1 = 1, az = 1, W; = 2.1, r+1 = 0.21, and 0 = 1.5. Your answer must be presented as the numerical value (e.g., Cit = 1.5). Derive the optimal value of c2t. For this question, suppose that a, = 2, a2 = v6, W; = 1, rt+1 = 0.5, and 0 = 0.5. Your answer must be presented as the numerical value (e.g., C2t = 2).
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