Question

A consumer has the following utility function where c1 is her consumption in period 1 and c2 is her consumption in period 2. She will earn 100 units of the consumption good in period 1 and 100 units of the consumption good in period 2. She can borrow or lend at an interest rate of 10%. Address the following questions: 1. Write an equation that describes her budget 2. If this consumer neither borrows nor lends, what will be her marginal rate of substitution between current and future consumption? 3. If this consumer does the optimal amount of borrowing or saving, what will be the ratio of her period 2 consumption to her period 1 consumption? This question has nine possible answers, but only three of them are correct. Each correct answer is worth 1/3 of the total grade, and each incorrect answer subtracts approx. 1/7 of the total grade. a) c1 + (c2/1.1) = 200/1.1 b) c1 + (c2/1.1) = 100 + 100 c) If this consumer neither borrows nor lends, her marginal rate of substitution between current and future consumption is 2 d) She will consume 4.84 times as much in period 2 as in period 1 e) If this consumer neither borrows nor lends, her marginal rate of substitution between current and future consumption is 0.9090 f) She will consume 3.31 times as much in period 2 as in period 1 g) If this consumer neither borrows nor lends, her marginal rate of substitution between current and future consumption is 1.1 h) She will consume 2 times as much in period 2 as in period 1 I) c1 + (c2/1.1) = 100 + (100/1.1)

Name: a consumer has the following utility function where c1 is her consumption in period 1 and c2 is her consumption in period 2 she will earn 100 units of the consumption good in period 1 and 10 01879
Uploaded: 2024-06-20T16:51:38-08:00
Duration: 5 min 42 s
Channel: Jerelyn Nevil
Description: a consumer has the following utility function where c1 is her consumption in period 1 and c2 is her consumption in period 2 she will earn 100 units of the consumption good in period 1 and 10 01879

A consumer has the following utility function
where c1 is her consumption in period 1 and c2 is her consumption in period 2. She will earn 100 units of the consumption good in period 1 and 100 units of the consumption good in period 2. She can borrow or lend at an interest rate of 10%. Address the following questions:
1. Write an equation that describes her budget
2. If this consumer neither borrows nor lends, what will be her marginal rate of substitution between current and future consumption?
3. If this consumer does the optimal amount of borrowing or saving, what will be the ratio of her period 2 consumption to her period 1 consumption?
This question has nine possible answers, but only three of them are correct. Each correct answer is worth 1/3 of the total grade, and each incorrect answer subtracts approx. 1/7 of the total grade.
a) c1 + (c2/1.1) = 200/1.1
b) c1 + (c2/1.1) = 100 + 100
c) If this consumer neither borrows nor lends, her marginal rate of substitution between current and future consumption is 2
d) She will consume 4.84 times as much in period 2 as in period 1
e) If this consumer neither borrows nor lends, her marginal rate of substitution between current and future consumption is 0.9090
f) She will consume 3.31 times as much in period 2 as in period 1
g) If this consumer neither borrows nor lends, her marginal rate of substitution between current and future consumption is 1.1
h) She will consume 2 times as much in period 2 as in period 1
I) c1 + (c2/1.1) = 100 + (100/1.1)

Added by Victor Manuel S.

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