Consider an individual that lives for two periods. The utility function is U(c1, c2) = c1 c20, where c; is 0.5 0.5 consumption in period i, i=1,2.The price of c1 and c2 is 1. The labor income in the first period is Y =200€ and in the second Y2 =50€ The interest rate is r= 0.1 (i.e., 10%). There is a proportional tax on labor income of t 0.25, i.e. 25% (in both periods). There is also a tax on capital income of t = 0.2, i.e., 20%. The tax on capital income has an exemption of 2, i.e. the first 2 euros do not pay taxes, but the rest of the capital income is taxed at the rate 20% (there is no exemption for the labor income). A) Find private savings, S.
Consider an individual that lives for two periods. The utility function is U(c1, c2) = c1 c20, where c; is 0.5 0.5 consumption in period i, i=1,2.The price of c1 and c2 is 1. The labor income in the first period is Y =200€ and in the second Y2 =50€ The interest rate is r= 0.1 (i.e., 10%). There is a proportional tax on labor income of t 0.25, i.e. 25% (in both periods). There is also a tax on capital income of t = 0.2, i.e., 20%. The tax on capital income has an exemption of 2, i.e. the first 2 euros do not pay taxes, but the rest of the capital income is taxed at the rate 20% (there is no exemption for the labor income). A) Find private savings, S.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Pls solve both questions with proper explanation , otherwise I will give you downvote
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