Write down the tangency condition for type a and b agents

Reference no: EM13243523

Consider the 2-period environment from class.The economy is populated by two types of agents A and B. There is an equalnumber (N) of each type. The agents have preferences which incorporate impatience. The agents put less emphasis on future consumption than on consumption in period 1.Specifically, the preferences are

MU(c1) = 1/c1 andMU(c2) = β/c2

Where β is positive but less than1

Type A's endowment pattern is(y1A,y2A) = (x,0) wherex > 0. Type B's endowment pattern is(y1B,y2B) = (0,1). Let1 + r1 be the real rate of return

(a) Write down the tangency conditionfor a type A and B agents.

(b) Find the equilibrium real rate of return.How does 1+ r1 depend on β? How does 1 + r1 depend on x? What is the intuition forthese effects?

Reference no: EM13243523

Questions Cloud

What are the speeds of the u.s. and the french subs : A French submarine and a U.S. submarine move toward each other during maneuvers in motionless water in the North Atlantic, What are the speeds of the U.S. and the French subs

Long distance telephone service has become a competitive : Long distance telephone service has become a competitive market. The average cost per call is $0.05 a minute, and it's declining. The likely reason for the declining price for long distance service is:

Explain how many grams of mercury oxide : How many grams of mercury(II) oxide are needed to produce 3.05 L of oxygen gas according to the following reaction at 25 C and 1 atm mercury(II) oxide (s)------ mercury (l) + oxygen (g)

Derive the specific euler equation implied by the preference : The tangency condition implies the Euler equation MU(Ct) = (1+r1 ) MU (Ct+1). Now assume the marginal utility functions are MU (Ct) =βtct-1/α (1) where α is the intertemporal elasticity of substitution(IES) (a) Derive the specific Euler equat..

Write down the tangency condition for type a and b agents : Consider the 2-period environment from class.The economy is populated by two types of agents A and B. There is an equalnumber (N) of each type. The agents have preferences which incorporate impatience.

Describe in detail what is the half life : What is the half life? How long would it take for the concentration of CH3NC to decrease to 75% of its initial value? to 30% of its initial value

Define what volume of oxygen gas is required to react : What volume of oxygen gas is required to react completely with 0.132 mol of glucose (C6H12O6) according to the following reaction at 0 C and 1 atm

Explain how many moles of methane ch4 are required to react : How many moles of methane (CH4) are required to react completely with 139 L of carbon tetrachloride according to the following reaction at 0 C and 1 atm

What population value should be used with data : What is the majority of the type of data summarized on the first page of this article and Measurement or categorical - What population value should be used with data? population mean or population proportion

User Account

All Pages