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Homework answers / question archive / Your parents give you an allowance of 100 pounds for this year and 110 for the next
Your parents give you an allowance of 100 pounds for this year and 110 for the next. Credit markets are perfect, and the interest rate is 10%. You are planning your consumption for this year, Co, and for the next year, cz. Your utility from a consumption plan (C,C) is given by U(CO, C) = coºc1-8 where e is between zero and one. a. Write down the expression of your budget constraint for consumption plans (Co. C) for current and next year. [7 Marks] b. Compute the MRS between c, and c as a function of e.
