If your utility function is the following form:U(c) = c1 + B c2, where c1 is the consumptionin period 1, c2 is the consumption in period 2,the time-preference parameter, B= 1 andperiod l's endowments el= 500 and period2's endowments e2 = 400, what is the optimalconsumption in each period if (a) the interestrate (r) is zero, and (b) the interest rate (r) ispositive?%3D

The above given problem is a case of intertemporal choice, where consumption is done in 2 period.…

If your utility function is the following form: U(c) = c1 + B c2, where c1 is the consumption in period 1, c2 is the consumption in period 2, the time-preference parameter, B= 1 and period 1's endowments el= 500 and period 2's endowments e2 = 400, what is the optima consumption in each period if (a) the interest rate (r) is zero, and (b) the interest rate (r) is positive?

If your utility function is the following form: U(c) = c1 + B c2, where c1 is the consumption in period 1, c2 is the consumption in period 2, the time-preference parameter, B= 1 and period 1's endowments el= 500 and period 2's endowments e2 = 400, what is the optima consumption in each period if (a) the interest rate (r) is zero, and (b) the interest rate (r) is positive?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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