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

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