Old Macdonald has a farm. He works 80 hours a week. He can either grow rhubarb or raisechickens. Every hour that he spends growing rhubarb gives him £2 of income this year. Every hourthat he spends raising chickens this year will add £4 to his income next year. In fact, next year'sweekly income will be 100 + 4H pounds where H is the number of hours he spends raisingchickens this year. Old Macdonald's utility function is U(c1, c2) = min{c1, c2} , where ci and c2 arehis consumption expenditures this year and next year. Old Macdonald doesn't believe in banks andwill neither lend money nor borrow money.i.Explain how Old Macdonald budget line for current and future consumption wouldlook like, identifying key points on it.ii.How many hours a week will he choose to spend raising chickens?How much money will he spend per week on consumption in each year?iii.

Hours Macdonald spend on working in one week= 80 hours Utility; U(c1,c2)= min{c1,c2} where; c1 is…

Old Macdonald has a farm. He works 80 hours a week. He can either grow rhubarb or raise chickens. Every hour that he spends growing rhubarb gives him £2 of income this year. Every hour that he spends raising chickens this year will add £4 to his income next year. In fact, next year's weekly income will be 100 + 4H pounds where H is the number of hours he spends raising chickens this year. Old Macdonald's utility function is U(cı, c2) = min{ci, c2} , where c¡ and c2 are his consumption expenditures this year and next year. Old Macdonald doesn't believe in banks and will neither lend money nor borrow money. i. Explain how Old Macdonald budget line for current and future consumption would look like, identifying key points on it. ii. How many hours a week will he choose to spend raising chickens? iii. How much money will he spend per week on consumption in each year?

Old Macdonald has a farm. He works 80 hours a week. He can either grow rhubarb or raise chickens. Every hour that he spends growing rhubarb gives him £2 of income this year. Every hour that he spends raising chickens this year will add £4 to his income next year. In fact, next year's weekly income will be 100 + 4H pounds where H is the number of hours he spends raising chickens this year. Old Macdonald's utility function is U(cı, c2) = min{ci, c2} , where c¡ and c2 are his consumption expenditures this year and next year. Old Macdonald doesn't believe in banks and will neither lend money nor borrow money. i. Explain how Old Macdonald budget line for current and future consumption would look like, identifying key points on it. ii. How many hours a week will he choose to spend raising chickens? iii. How much money will he spend per week on consumption in each year?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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