Suppose the population grows, andn 2. Suppose the endowment stays constant, i.e. wi=where y 3. Suppose the preferences of generations 1, 2,.., are(7,0)u(c1, c2) = cf c2,and those of the IO are%3DRestrict attention to symmetric a-allocations, i.e. allocations withC11 = ay,C2,1 = (1 - a)ny, t=1,2,....%3!%3Da. Find the Golden Rule allocation.b. Is the a-allocation with a =0.8 Pareto optimal? Explain.

Given, The population growth rate = n = 2 The endowment income of each consumer when young =y = 3…

Suppose the population grows, andn 2. Suppose the endowment stays constant, i.e. wi (y,0) where y = 3. Suppose the preferences of generations 1,2, ., are u(ci, c2) = c c2, %3D and those of the IO are u0(c2) = 02. Restrict attention to symmetric a-allocations, i.e. allocations with C1,t = ay, ©2,4 = (1- a)ny, t=1,2,... a. Find the Golden Rule allocation. b. Is the a-allocation with a = 0.8 Pareto optimal? Explain.

Suppose the population grows, andn 2. Suppose the endowment stays constant, i.e. wi (y,0) where y = 3. Suppose the preferences of generations 1,2, ., are u(ci, c2) = c c2, %3D and those of the IO are u0(c2) = 02. Restrict attention to symmetric a-allocations, i.e. allocations with C1,t = ay, ©2,4 = (1- a)ny, t=1,2,... a. Find the Golden Rule allocation. b. Is the a-allocation with a = 0.8 Pareto optimal? Explain.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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