This class exercise is from W4 in MT and covers Intertemporal choices (Consumer Theory topic). All the exercises are thoroughly calculated, clearly written with good explanation and accurate solutions.
ML
total income :
m ,
+
Fr we
get just as much as we need
(PV ) minus the
money
we would need
to
repay for the
borrowing
total consumption :
pc ,
+
P%÷
so
budget constraints (PV) :
all our income
spent on all the
consumption
ma
+ Paca
mi Fr after normalize
=
pic, Fr we
-1¥
ML
mi +
1+7 =
a
no
consumption in P1 all m, is
saving
worth ( tr) m ,
in P2
the most to be consumer is value of savings in P2 and income in P2 :
(tr) m ,
+
my
future value of endowment
, -
Mz
cz=
0 M ,
-1
( tr)
=
C,
,
so
present value ,
cause our spending
that was
supposed to be in the future
happens now
M2 ¢+4m ,
+ m2
intercepts (tr) slope
: = = -
c. Mit so
( tr)m +
m+a÷,
↳
=
, my
↳
A
¢+4m ,
+
me
-
Clerk , -
M2 endowment
/ ,
- . - . - . . . . .
•
p
i. (tr)
slope
= -
÷ ←
a
i i >
nip ,
me II -
÷
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