Solve for the household's choice of consumption in time 1 (c₁) if tax in time 1 (71) is $30. (a) 100.76 (b) 125.12 (c) 160.97 (d) 175.16 Solve for the private saving. (a) 19.24 (b) -5.76 (c) -40.97 (d) -75.76 (Use this information to answer qustion 13 - 16) Suppose a household solves the following two-period consumption-savings problem max u(c1) + Bu(c2) {C1,C2} s.t. aw Y1 - C1 C2Y2 = (1+r) a with u(c) = √c where c₁ is consumption at time 1, c2 is consumption at time 2, ₁ is houshold income at time 1, y2 is houshold income at time 2 and w is the initial wealth. Suppose the incomes of the household are $50 in time 1 and $210 in time 2. The initial wealth is $100, the discount factor is 0.975 and interest rate is 5%. Solve for the household's choice of C1. (a) 125.12 (b) 126.58 (c) 175.16 (d) 341.88
Solve for the household's choice of consumption in time 1 (c₁) if tax in time 1 (71) is $30. (a) 100.76 (b) 125.12 (c) 160.97 (d) 175.16 Solve for the private saving. (a) 19.24 (b) -5.76 (c) -40.97 (d) -75.76 (Use this information to answer qustion 13 - 16) Suppose a household solves the following two-period consumption-savings problem max u(c1) + Bu(c2) {C1,C2} s.t. aw Y1 - C1 C2Y2 = (1+r) a with u(c) = √c where c₁ is consumption at time 1, c2 is consumption at time 2, ₁ is houshold income at time 1, y2 is houshold income at time 2 and w is the initial wealth. Suppose the incomes of the household are $50 in time 1 and $210 in time 2. The initial wealth is $100, the discount factor is 0.975 and interest rate is 5%. Solve for the household's choice of C1. (a) 125.12 (b) 126.58 (c) 175.16 (d) 341.88
Chapter4: Utility Maximization And Choice
Section: Chapter Questions
Problem 4.3P
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Question
Transcribed Image Text:Solve for the household's choice of consumption in time 1 (c₁) if tax in
time 1 (71) is $30.
(a) 100.76
(b) 125.12
(c) 160.97
(d) 175.16
Solve for the private saving.
(a) 19.24
(b) -5.76
(c) -40.97
(d) -75.76
Transcribed Image Text:(Use this information to answer qustion 13 - 16) Suppose a household
solves the following two-period consumption-savings problem
max u(c1) + Bu(c2)
{C1,C2}
s.t. aw Y1 - C1
C2Y2
=
(1+r) a
with u(c) = √c where c₁ is consumption at time 1, c2 is consumption at
time 2, ₁ is houshold income at time 1, y2 is houshold income at time
2 and w is the initial wealth. Suppose the incomes of the household are
$50 in time 1 and $210 in time 2. The initial wealth is $100, the discount
factor is 0.975 and interest rate is 5%. Solve for the household's choice of
C1.
(a) 125.12
(b) 126.58
(c) 175.16
(d) 341.88
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