Suppose that•y =100 (income today)• y' = 150 (income tomorrow)• r = 10% (interest rate on bonds)t = 10 (taxes today)%3D• t' = 10 (taxes tomorrow)What is the lifetime budget constraint for the consumer?c + c'/1.1 = 250c + c'/1.1 = 230c + c' = 217.27c + c'/1.1 = 217.27

Suppose that • y =100 (income today) y' = 150 (income tomorrow) • r = 10% (interest rate on bonds) • t = 10 (taxes today) • t' = 10 (taxes tomorrow) What is the lifetime budget constraint for the consumer? c + c'/1.1 = 250 %3D c + c'/1.1 = 230 %3D C + c' = 217.27 c + c'/1.1 = 217.27

Suppose that • y =100 (income today) y' = 150 (income tomorrow) • r = 10% (interest rate on bonds) • t = 10 (taxes today) • t' = 10 (taxes tomorrow) What is the lifetime budget constraint for the consumer? c + c'/1.1 = 250 %3D c + c'/1.1 = 230 %3D C + c' = 217.27 c + c'/1.1 = 217.27

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter1: What Is Economics

Section1.3: What Do Economists Do?

Problem 5R

See similar textbooks

Similar questions

Carlos is buying salad and pizza for a company lunch. Suppose that a bowl of salad costs $4.00, and a slice of pizza costs $2.00. Let E be the amount in dollars that Carlos spends on salad and pizza. If Carlos buys S bowls of salad and P slices of pizza, then the total amount of money he spends (E) can be represented by the equation Now rearrange the equation you wrote above so that P is written in terms of E and S. The quantity of pizza he buys can be represented by the equation Suppose Carlos has $40.00 to spend on salad and pizza; that is, E = $40.00. Complete the following table with the values of S or P that make the equation true. Hint: To complete the first row, determine the number of pizza slices Carlos can purchase with $40.00, when the number of salad bowls he purchases is 0. Budget (Dollars) 40.00 40.00 40.00 Salad Pizza (Bowls) (Slices) 0 5 0 Use the black line (plus symbols) to plot the line illustrating the combinations of salad and pizza that Carlos can purchase with a…
Problem 1 Mary has the following utility function: u(x, y) = I = 10 and the prices originally are p̟ = 1 and p, = 2 3 In(x) + 2y. Her income is given by %3D (a) What are Mary's marshallian demands? (b) How much of each good is Mary currently consuming? (c) What is the utility level that Mary can achieve? (d) Assume the price of r increases to p, = 3, find Mary's new levels of consumption. (e) Find the total, substitution and income effects for good r caused by the price change. Consider this price change a "large" price change (Apz = p, - Px = 3 – 1 = 2).
99. Subject :- Accounting
Task 5: Consumption as young and consumption as old Now suppose Mary is thinking about her retirement and wants to understand how much to save. Today she can either con- sume or save for retirement. During her young, working life she will make 100.000 euros. Thus, her current budget constraint is Cy + S = 100.000. In her retirement she has no income, only the amount she saved as young. She can save at a rate of (1+r). So, her budget constraint as old is Co = (1+r)S. (a) Write Mary's lifetime budget constraint as plot it in a graph. Tip: Solve for savings while old and substitute in the young budget constraint. (b) Mary's utility from consumption as young and consumption as old is U(Cy,Co) = 1-0 Solve Mary's maximization problem. What is the MRS and the MRT? (c) Suppose Mary wins the lottery while young. What is the effect on her optimal decision for consumption as young and as old? (d) The local bank decided to increase the interest rate on savings. Discuss the effect of this increase…
Unlike households, governments are often able to sustain large debts. For example, in 2013, the US government’s total debt reached $17.3 trillion, approximately equal to 101.6% of GDP. At the time, according to the U.S. Treasury, the average interest rate paid by the government on its debt was 2.0%. However, running budget deficits becomes hard when very large debts are outstanding. (a) Calculate the dollar cost of the annual interest on the government’s total debt assuming the interest rate and debt figures cited above.(b) If the government operates on a balanced budget before interest payments are taken into account, at what rate must GDP grow in order for the debt-GDP ratio to remain unchanged.(c) Calculate the total increase in national debt if the government incurs a deficit of $600B in 2014.(d) At what rate would GDP have to grow in order for the debt-GDP ratio to remain unchanged when the deficit in 2014 is $600B?(e) Why is the debt-GDP ratio the preferred measure of a country’s…
Attached
1. Which of the following represents the household's lifetime budget constraint? a. q +a₂ = 1 b. c₂ = 1/₂+(1+m₂)a₂ c₁+c₂/(1+₂) = 1 +32/(1+12) d. U = Inc + Blnc₂ 2. Which of the following are choice variables of the household? a. Yl b. y2 C₁ d. 12 3. If the household can borrow and lend, an increase in y₁ causes which of the following to increase? a. C1 C2 c. 92 d. all of the above 4. For a household that can borrow and lend, the horizontal intercept of a sketch of the lifetime budget constraint is a. Y1 by₁+ 1 y2 1+12 c. Y2 d. (1+12)y1+y2 5. Suppose a household can borrow and lend in a perfectly competitive credit market. Assume B=0.2 and r2 = 0.10. The value for the optimal choice of a2 when y₁ = 10 and y2 = 0 is a. 1.67 b. 0.00 c. -5.91 (d)-7.58
2. Consider an individual who not only consumes goods x and y, but also needs a mini- mum amount of x = xo to survive. Her (Stone-Geary) utility function is given by U(x, y) = (x − xo)¹/2y¹/2 Let prices be pa, Py and income is I > Prxo.
Exercise 1 A consumer's utility function is u(x, y) = x²y³ and the budget constraint is prx +Pyy ≤ w, where the parameters pr, Py and we are all strictly positive. (a) Solve the consumer's utility maximization problem. (b) Use the envelope theorem to estimate the change in the indirect utility function (i.e., the problem's value function) when the price py is changed to py + e, with e > 0.
Suppose your total benefits of renting x DVD's next month is: -²2² +14x+50 The cost of renting a DVD is $2, and so the total cost of renting x DVD's is $2x. Calculate your net benefit from watching 1, 2...8 DVDs. Complete column (2). (Enter your responses as integers.) (1) DVDs Rented 0 1 N345678 2 (2) Total Net Benefit
A consumer is maximising her utility function: U(x, y) = (x¹/³+y¹/³)³, subject to the budget constraint x + 3y = 100. (a) Set up the Lagrangian function of this utility maximisation problem and derive the first-order conditions. (b) What are the utility maximizing amounts of x and y? Also, calculate the Lagrange multiplier. (c) What are the utility maximising amounts of x and y if the budget constraint changes to x + 3y = 50? Also, calculate the Lagrange multiplier.
! (asap)