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.
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.
Chapter17: Capital And Time
Section: Chapter Questions
Problem 17.8P
Question

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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