4. The intertemporal budget constraint with three periods: Consider an economy that exists for three periods: period 1, period 2, and period 3. In each period, the government must satisfy the budget constraint B1= )B; + G - I 1. Write this budget constraint for each period. 2. What must be true about B4? 3. Using the result from part (b), solve the period 3 budget constraint for B, and substitute this back into the period 2 budget constraint. 4. Solve this new version of the period 2 budget constraint for B2 and substitute the result back into the period 1 budget constraint. 5. At this point, you should have the intertemporal budget constraint for the three-period economy. Interpret this equation.

What term describes the decrease in general satisfaction a person gets from consuming. each additional unit of a product? A) Consumer Surplus B) Marginal Utility C) Marginal Cost D) Diminishing Returns

Your own a chocolate producing company which can advertise on both television (T) and internet(I). The effect of TV and online commercials on sales is again given byS(T,I) = 500 + 48T−6T2+ 112I−6I2+ 4TI. You have a budget of $25 that you can spend on T and I. The price of aTV commercial is $12per unit and the price of an online commercial is also $12 per unit. 1. Determine the optimal level of TV commercials T and online commercials  I if you have to spend all of your budget. You should provide two methods to solve this, by direct substitution and by setting up the Lagrangian. Is the Lagrange multiplier positive or negative? Give an intuitive interpretation of why this is the case? 2. Now determine the optimal level of TV commercials T and online commercials I if you DO NOT have to spend all of your budget. Do you obtain the same answer as subquestion 5.1? What is the Lagrange multiplier equal to in this case? Discuss.

Becasue of the housing bubble, many houses are now selling for much less than their selling price just two to three years ago. There is evidence that home owners with virtually identical houses tend to asl for more if they paid more for the house.What fallacy are they making?