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Patience Has the Utility Function Where C1 Is Her

Question 23

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Patience has the utility function Patience has the utility function where c<sub>1</sub> is her consumption in period 1 and c<sub>1</sub> is her consumption in period 2. She will earn 100 units of the consumption good in period 1 and 100 units of the consumption good in period 2. She can borrow or lend at an interest rate of 10%. a. Write an equation that describes Patience's budget. b. If Patience neither borrows nor lends, what will be her marginal rate of substitution between current and future consumption? c. If Patience does the optimal amount of borrowing or saving, what will be the ratio of her period 2 consumption to her period 1 consumption? where c1 is her consumption in period 1 and c1 is her consumption in period 2. She will earn 100 units of the consumption good in period 1 and 100 units of the consumption good in period 2. She can borrow or lend at an interest rate of 10%.
a. Write an equation that describes Patience's budget.
b. If Patience neither borrows nor lends, what will be her marginal rate of substitution between current and future consumption?
c. If Patience does the optimal amount of borrowing or saving, what will be the ratio of her period 2 consumption to her period 1 consumption?

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c. She will c...

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