Question 4 Explain how does a decrease in the current income y affect the consumer's consumption-saving decision. In particular, explain: 1) How will current consumption c, future consumption c', and savings s change; 2) Are there any substitution effect or income effect. Make sure you draw two figures, one for the borrowers and one for the lenders.

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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Question 4
Explain how does a
decrease in the current income y affect the consumer's consumption-saving decision. In particular,
explain: 1) How will current consumption c, future consumption c', and savings s change; 2) Are
there any substitution effect or income effect. Make sure you draw two figures, one for the borrowers
and one for the lenders.
Transcribed Image Text:Question 4 Explain how does a decrease in the current income y affect the consumer's consumption-saving decision. In particular, explain: 1) How will current consumption c, future consumption c', and savings s change; 2) Are there any substitution effect or income effect. Make sure you draw two figures, one for the borrowers and one for the lenders.
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