Sarah with preferences U = c1^1/3, c2^2/3 has a human capital production function R = 6E1/2. She earns income m1 = $12 and m2 = $12 and can borrow or lend at an interest rate of 50 percent. Provide calculations and a labelled diagram to evaluate Sarah's optimal expenditures on food and education and how these choices should be financed. What proportion of her lifetime earnings does she spend on c1? Show the Hicksian IE and SE when 1+r1.

Sarah with preferences U = c1^1/3, c2^2/3 has a human capital production function R = 6E1/2. She earns income m1 = $12 and m2 = $12 and can borrow or lend at an interest rate of 50 percent. Provide calculations and a labelled diagram to evaluate Sarah's optimal expenditures on food and education and how these choices should be financed. What proportion of her lifetime earnings does she spend on c1? Show the Hicksian IE and SE when 1+r1.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Consider a worker who consumes one good and has a preference for leisure. She maximizes the utility function u(x, L) = xL, where a represents consumption of the good and L represents leisure. Suppose that this worker can choose any L € [0, 1], and receives income w(1 – L); w represents the wage rate. Let p denote the price of the consumption good. In addition to her wage income, the worker also has a fixed income of y ≥ 0. (a) Write down the utility maximization problem for this consumer. Solution: The problem is max x L s.t. px ≤w(1 L) + y. x>0, LE [0,1] The budget constraint may also be written with equality since preferences are monotone. (b) Find the Marshallian demands for the consumption good and leisure. Solution: Using FOCs will find the maximum since preferences are Cobb-Douglas (and therefore convex). Dividing the FOCs L= Xp and x = Xw gives wL = px. Substituting into the budget constraint and checking the restriction L = [0, 1], we get and x(p, w, y) L(p, w, y) = = = 1 w+y…
question ii
Solve all this question......you will not solve all questions then I will give you down?? upvote...
QUESTION THREE A UPSA student decides to spend his income on any of these four items - pay tuition fees, pay hostel fees, buy foodstuffs, buy a laptop, and buy a gift for a friend. The market price and the student's expected monetary values or benefits placed on the items are, respectively, presented in the table below. Benefit GH¢ 1,410 1,380 1,480 1,510 1,450 Item Direct cost GH¢ Tuition Hostel 950 950 Food 950 Laptop Gift 950 950 A. Suppose the student has GH¢ 950.00 to spend on one of the five items. From your results in (A), i. Find the opportunity cost of each item. ii. Compute the net benefit of each item using the respective direct cost. iii. . Compute the net benefit of each item using the respective opportunity cost. iv. iv. From your results in (ii), which item should the student pay for? Explain your answer.
Kevin has a wage income of $10,000 in the present and $15,000 in the future. His utility is given as U = min (4cp, 5cf), where cp denotes consumption today and cf consumption in the future. The relevant interest rate is 10%. a. If the interest rate were to increase to 15 percent,would Kevin be better off or worse off? Explain. b. Find two measures to indicate how much better off or worse off Kevin is as a result of the increase in interest rates. Explain.
“The executive action is estimated to increase Supplemental Nutrition Assistance Program (SNAP) benefits, otherwise known as food stamps, for the 12 million families who rely on the aid most. The order would increase weekly benefits for a family of four by 15 or 20 per cent. An increase of benefits awarded through a school meals program for low-income families could also give a family of three children more than $100 in extra benefits every two months” (Hall, 2021). What problems do you foresee if these benefits were not available to these low-income families and migrants within the U.S.?
Kevin's reference dependent utility over money is y and effort is E, refer to the: instantaneous utility function: rt: reference point for wealth, which demonstrated his recent wealth Kevin does not have from money but from gains and losses of money instead. There is no discounting, and assume that Kevin's current wealth from his job is 0. Kevin is thinking about a new role at work which allows him to increase his income by $1000 per period for two periods, counting from the current period, which is t = 0. He must undergo a training which require an effort of EO = 3500 at that value of alpha, how much ultility would Kevin lose relative to his non-projection-biased preferences if she took the position 1000 250 500 750