Draw martin intertemporal budget constraints with

Assignment Help Business Economics

Reference no: EM131108346

Martin lives for two periods, earning $50,000 in income in period 1, which he consumes or saves for period 2. The interest rate on his saving is 10% per year. Interest income is taxed at rate τ = 30%.

(a) Draw Martin’s intertemporal budget constraints with and without tax. Label all intercepts and slopes on your graph.

(b) Suppose that Martin saves $15,000 if there is no tax on saving. With tax, the income and substitution effect exactly cancel out so that the tax has not effect on his savings. Draw a set of indifference curves consistent with this response.

Reference no: EM131108346

Questions Cloud

Example of a failure in domain : Explain the intent or meaning of the phrase "defense in depth", especially noting what the three key elements of defense in depth are and providing an example of a failure in each domain.

Bought without incurring transactions costs : You buy a house and pay for it. A year later the price of houses changes while all other prices(and your cash income) remain the same. Assume that houses can be sold and bought without incurring transactions costs. Show that the price change makes yo..

What was the nationality of those soldiers : The city of Ypres (Ieper) was totally destroyed in the first World War. What was the nationality of those soldiers

Average market price of common stock per share : There were no changes during 2010 in the number of common shares, preferred shares, or convertible bonds outstanding.

Draw martin intertemporal budget constraints with : Martin lives for two periods, earning $50,000 in income in period 1, which he consumes or saves for period 2. The interest rate on his saving is 10% per year. Interest income is taxed at rate τ = 30%. Draw Martin’s intertemporal budget constraints wi..

Describe a team experience that lacked cohesion : Using your previous experience as a team member, describe a team experience that lacked cohesion and/or was inefficient. After reviewing the components of team composition (i.e., personality, cognitive abilities, diversity, size), that are listed..

Design and implement a program : Design and implement a program (called MyTriangle) is to implement the specified methods. Test MyTriangle Class used to compute the area of a triangle if the input is valid. Notice that method isvalid() is used to validate the input before attempt..

How does depreciation enter into the calculation : How does depreciation enter into the calculation of operating cash inflows? How does the income statement format in Table 11.6 relate to Equation 4.3 for finding operating cash flow(OCF)?

Flat and nonhierarchical world culture : Drawing heavily on the course readings to date (i.e., Learning Units 1-5), please write a 5-6 page paper (double spaced, 12 point font) addressing the following questions: What do we mean by the "globalization of culture"?

User Account

All Pages