only typed solution Consider the dynamic choice of consumption with in-period utility given byu(c) = ln(c).• It's fairly easy to show that a person with this per-period utility flow whojudges a stream (C₁, C2, C3) by U(C₁, C2, C3) = Au(c₁) + Bu(c₂) + Cu(c3)and faces consumption prices P₁, P2, and p3 will split a total budget of Ssuch thatSC1 =AA+B+C P1S- C₂ = A+B+C P²₂P2S- C3 = A+B+C P3. If there are only two periods, the results is similar, just replace with C = 0.1. In(c) is an interesting utility function. Let's talk about it.(a) What shape does it have?(b) When 0 < c < 1, ln(c) is negative. Is that a problem? Is thereanything special about negative utility?(c) What is it about In(c) that means you'll consume something in allperiods (Assuming A, B, C > 0)

In economics, utility refers to the satisfaction or benefit that an individual derives from…

Consider the dynamic choice of consumption with in-period utility given by u(c) = ln(c). • It's fairly easy to show that a person with this per-period utility flow who judges a stream (C₁, C2, C3) by U(C1, C2, C3) Au(c₁) + Bu(c₂) + Cu(c3) and faces consumption prices P1, P2, and p3 will split a total budget of S such that = C1= B S A+B+C P2 S A+B+C P3 • If there are only two periods, the results is similar, just replace with C = 0. 1. In(c) is an interesting utility function. Let's talk about it. (a) What shape does it have? (b) When 0 < c < 1, ln(c) is negative. Is that a problem? Is there anything special about negative utility? - C2 = - S A A+B+C P1 C3 = (c) What is it about In(c) that means you'll consume something in all periods (Assuming A, B, C > 0)

Consider the dynamic choice of consumption with in-period utility given by u(c) = ln(c). • It's fairly easy to show that a person with this per-period utility flow who judges a stream (C₁, C2, C3) by U(C1, C2, C3) Au(c₁) + Bu(c₂) + Cu(c3) and faces consumption prices P1, P2, and p3 will split a total budget of S such that = C1= B S A+B+C P2 S A+B+C P3 • If there are only two periods, the results is similar, just replace with C = 0. 1. In(c) is an interesting utility function. Let's talk about it. (a) What shape does it have? (b) When 0 < c < 1, ln(c) is negative. Is that a problem? Is there anything special about negative utility? - C2 = - S A A+B+C P1 C3 = (c) What is it about In(c) that means you'll consume something in all periods (Assuming A, B, C > 0)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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