Consumption-savings problem in a two-period model

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Consider the consumption-savings problem in a two-period model without government. Suppose the lifetime utility function is given by U(c,c')=In(c)+bIn(c'), where 0<b<1. The consumer's budget constraints in each period are as follows. For period 1, c+s=y, and for period 2, c'=y'+(1+r)s for period 2. here s is the saving from period 1 to period 2, c is consumption, and y is income.

(a) Please write down the lifetime budget constraint facing the consumer.

(b)Please derive the expression for the optimal choices of c and c'

Reference no: EM131083645

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