Find the optimum of the consumer

Assignment Help Business Economics

Reference no: EM13840314

Suppose a consumer live two periods, in the first have an income m1 = 30 and in the second an income of m2 = 20. Suppose the interest rate is 10% and can borrow and lend at that interest rate.

(a) What is the maximum quantity he can consume in the first period?

(b) What is the maximum quantity he can consume in the second period?

(c) Draw the budget line clearly stating the intercepts and the slope. Suppose that the preferences for consumption in periods 1 and 2 of this individual can be represented by the utility function U(C1, C2) = (C2^2/3)*(C2^1/3) .

(d) Calculate the MRS at the endowment point (m1, m2) and tell if the consumer is patient or impatient.

(e) Find the optimum of the consumer. Suppose that the interest rate increases to 20%:

(f) Draw the new budget line clearly stating the intercepts and the slope.

(g) Explain what will happen with the optimal amounts of consumption in period 1 and period 2 with the new interest rate

Reference no: EM13840314

Questions Cloud

Research the codes of conduct of a large company : Research the codes of conduct of a large company, such as Microsoft, and a small company in your local community and compare the issues that they cover. Describe the commonalities and differences of content in the codes. Discuss why you think there a..

A number of options for costing systems : In the readings, we learned about a number of options for costing systems. Either explain the option your organization uses, or if not available, a company in the Middle East and its costing systems. In a 2-4 page paper, compare and contrast these co..

Description of psychological skills that would challenging : Brief description of two psychological skills that would be challenging for you to teach police professionals. Analyze why each skill would be a challenge, and explain how you would address each challenge. Support your analysis with references to ..

The model of the steady-state rate of unemployment : The model of the steady-state rate of unemployment assumes that the size of the labor force is fixed. If the size of the labor force is allowed to vary: Please tells me how the job-loss and job-finding processes will differ from the situation when th..

Find the optimum of the consumer : Suppose a consumer live two periods, in the first have an income m1 = 30 and in the second an income of m2 = 20. Suppose the interest rate is 10% and can borrow and lend at that interest rate. What is the maximum quantity he can consume in the second..

Analyze the apple case within the political frame : Utilizing your previous knowledge/experience with different organizations,compare Jobs with at least two other business leaders, analyzing the relationship between each leader's power and influence inside and outside of their organizations. Analyz..

Calculate the optimal quantity and the new consumer surplus : Let the inverse demand curve for tennis classes is: P = 90 - 1.5Q. If the equilibrium price is $15, calculate the optimal quantity and the consumer surplus. If price increase to $30, calculate the optimal quantity and the new consumer surplus.

Sells price-elastic products or price-inelastic products : Think of another good that you have purchased recently Be specific (e.g. is it breakfast cereal in general or Cheerio’s cereal specifically). If the price of this item increases, how would this affect the quantity of the good that you consume? Would ..

Evaluate cost of goods sold for the month : During 2014, Parker Enterprises generated revenues of $90,000. The company's expenses were as follows: cost of goods sold of $45,000, operating expenses of $18,000 and a loss on the sale of equipment of $3,000.

User Account

All Pages