consumption today, c2 her consumption tomorrow, m₁ her income today, and m2 her income tomorrow. Her preferences over (C1, C2) can be represented by the utility function u(c1, c2). She can save at rate rs and borrow at rate rB. In each of the following situations, determine whether she will save, borrow, or do neither, and provide a brief explanation. 144, and rs = гB = 0.2. (a) u(c1, c2) = c1c2, m₁ = 100, m2 = (b) u(c1, c2) = ln(c₁) + 2 ln(c2), m₁ = (c) u(c1, c2)=√√c₁+0.9√√√c2, m₁ = 100, m2 = 100, m2 = 200, rs = 0.1, and rp = 0.15. 100, rs = 0.1, and rp = 0.15.

Microeconomic Theory
12th Edition
ISBN:9781337517942
Author:NICHOLSON
Publisher:NICHOLSON
Chapter17: Capital And Time
Section: Chapter Questions
Problem 17.8P
Question
consumption today, c2 her consumption tomorrow, m₁ her income today, and m2 her income
tomorrow. Her preferences over (C1, C2) can be represented by the utility function u(c1, c2).
She can save at rate rs and borrow at rate rB. In each of the following situations, determine
whether she will save, borrow, or do neither, and provide a brief explanation.
144, and rs = гB = 0.2.
(a) u(c1, c2) = c1c2, m₁ = 100, m2 =
(b) u(c1, c2) = ln(c₁) + 2 ln(c2), m₁ =
(c) u(c1, c2)=√√c₁+0.9√√√c2, m₁ =
100, m2 =
100, m2 =
200, rs = 0.1, and rp = 0.15.
100, rs = 0.1, and rp = 0.15.
Transcribed Image Text:consumption today, c2 her consumption tomorrow, m₁ her income today, and m2 her income tomorrow. Her preferences over (C1, C2) can be represented by the utility function u(c1, c2). She can save at rate rs and borrow at rate rB. In each of the following situations, determine whether she will save, borrow, or do neither, and provide a brief explanation. 144, and rs = гB = 0.2. (a) u(c1, c2) = c1c2, m₁ = 100, m2 = (b) u(c1, c2) = ln(c₁) + 2 ln(c2), m₁ = (c) u(c1, c2)=√√c₁+0.9√√√c2, m₁ = 100, m2 = 100, m2 = 200, rs = 0.1, and rp = 0.15. 100, rs = 0.1, and rp = 0.15.
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