Q1. Consider a consumer with a lifetime utility functionU(c, c') = u(c) + Bu(c)that satisfies all the standard assumptions listed in the book. The period 1 and 2 budgetconstraints arec+s=yc+sy+(1+r)s(a) What is the optimal value of s'? Impose this optimal value and derive the life-timebudget constraint.

REFERENCEWillman, A. (2003). Consumption, habit persistence, imperfect information and the lifetime…

Answered: Q1. Consider a consumer with a lifetime…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Find the quantities of each product that the consumer should buy, subject to the budget, that will allow maximum satisfaction. That is, find values of x and y that maximize U = f(x,y), subject to xpy + ypy = 1. Assume that such a maximum exists. U=x°y°: Px =2, py = 3, 1 = 60 (x³y³ + o) The values that maximize U are x = and y = (Simplify your answers.)
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