Problem Set 2 Answers - Marc Teignier

ProblemSet2 AnswersIntermediateMicro economics( 22014 )Group13-Fall2011 DueonWednesday,9/28 (c1,c2) = (c1)1/2(c2)1/2wherec1denotestheamountcon sumedinp erio d1andc2theamountconsumedinp erio osethatp erio d1incomeexpressedinunitsofgo o d1ism1= 20000andp erio d2incomeexpressedinunitsofgo o d2ism2= osealsothatp1=p2= or-rower?Answer:c 1= ,c 2= 'sequationandagraphtoexplainwhatwouldhap p :c1increasesb ecauseofb oththeincomeandthesubstitutione ,andletp1=p2= 1andr= osetheconsumerisaskedtocho oseb etweentwobundles,(c1,c2) = (25,16)and(c1,c2) = (9,36).Whichonewouldshecho ose?Answer:The rstone,b ecauseu(25,16) = 20>18 =u(9,36).

Problem Set 2 Answers Intermediate Microeconomics (22014) Group 13 - allF 2011 Due on Wednesda,y 9/28/2011 EXERCISE 1. - Borrowing and lending Consider a consumer with preferences over current and future consumption given by

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