Microeconomics exercise questions I have sample questions. If you can solve my exam same day message me
EXERCISE 5
Assume that you are a consumer that is facing intertemporal choice problem: (,+1)=
()+ 1
1+(+1), where ()= √. Your initial endowment in the periods t and t+1 is the
same and equal to $400.
a) What should be the value of that would make you indifferent between consuming today
and tomorrow? In which case you care only about your current consumption?
b) Assume that = 0.2 and = 0.4. What is your optimal consumption ( ∗;+1∗ ) in this case?
Are you a borrower or a le nder?
c) Assume that = 0.4 and = 0.2. What is your optimal consumption ( ∗;+1∗ ) in this case?
Are you a borrower or a lender?
d) Support graphically your answers to the previous points