ECON 100A Lecture 28: ECON 100A 11-30-2016

33 views2 pages
5 Dec 2016
School
Department
Course

Document Summary

Max u (c1, c2) subject to c1 (1+r) + c2 = y1 (1+r) + y2. = u (c1, c2) + ( y1 (1+r) + y2 - c1 (1+r) - c2 ) / c1 = u1 - (1+r) = 0. / c2 = u2 - = 0. The interest rate is 10%. y1 = 100. y2 = 121. = c1c2 + ( y1 (1+r) + y2 - c1 (1+r) - c2 ) / c1 = c1 - (1+r) = 0. / c2 = c2 - = 0. C2 / c1 = 1+r = 1. 1. 1. 1c1 + c2 = 100*1. 1+121 = 231. Intuition: borrowed ; had to return *1. 1 = . 5, left with = . 5. Ex u (c1, c2) = min(c1, c2) Does c1 increase or decrease with r subject to c1(1+r)+c2 = 60(1+r)+40. C1 = c2 = (100+60r) / (2+r) = ( (2+r)*60 20) / (2+r) = 60 20 / (2+r) = 1 could by 100 units.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related Questions