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1) (Ch. 1 Assume you have $10,000 in income in each of two periods (TI &...

Question

1) (Ch. 1 Assume you have $10,000 in income in each of two periods (TI &...

1) (Ch. 1 Assume you have $10,000 in income in each of two periods (TI & T2). a) If you can lend and borrow at 7%, what is your opportunity set algebraically (show steps) and graphically? b) If your utility curve is U ACIC -0.8cIc: (where A - 0.8), what are your optimal consumptions for TI and T2? Show your answer algebraically (with calculations) and graphically c) Are you a lender or borrower? Briefly explain d) i) At what A,, value in the utility curve (U-AC1C2) will you behavior differently than c) and become neither a borrower nor a lender? ii) What are your optimal consumptions for Tl and T2 with the new utility curve in d) (0? ii) Show your answer graphically e) Briefly explain why you change your behavior in (d) above
1) (Ch. 1 Assume you have $10,000 in income in each of two periods (TI & T2). a) If you can lend and borrow at 7%, what is your opportunity set algebraically (show steps) and graphically? b) If your utility curve is U ACIC -0.8cIc: (where A - 0.8), what are your optimal consumptions for TI and T2? Show your answer algebraically (with calculations) and graphically c) Are you a lender or borrower? Briefly explain d) i) At what ''A,, value in the utility curve (U-AC1C2) will you behavior differently than c) and become neither a borrower nor a lender? ii) What are your optimal consumptions for Tl and T2 with the new utility curve in d) (0? ii) Show your answer graphically e) Briefly explain why you change your behavior in (d) above

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