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Economics

Suppose a person has a utility function over consumption today (C1) vs con- sumption tomorrow (C2) given by: log(C1) + 0.9log(C2). Suppose the person has access to a savings account that pays back an amount 3%, and has $10to start.

a) prepare down the person's budget constraint?

b) What is the person's marginal rate of substitution of consumption today for consumption tomorrow?

c) How much does the person save?

d) Suppose there is a 50% chance of the savings account losing half your money. How much does the person save now?

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Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M970046

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