Find the optimal levels of c1 and c2

Reference no: EM133380685

Questions:

1. Let c1 be consumption in period 1, and c2 consumption in period 2. The consumer receives income Y1 in period 1 and income Y2 in period 2, and chooses consumption bundle (c1, c2) to maximize U(c1, c2). Assuming r for the market interest rate, and 8 for the consumer's subjective discount factor, find the optimal levels of c1 and c2.

2. The question above is modified for 3 periods, with consumption c1-c3, U(c1, c2, c3), and Y1-Y3. Solve for optimal c1 through c3.

Reference no: EM133380685

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