## Economics -Q55 Online Services

The assignment is out of 20 points. You are welcome to collaborate with your classmates for this assignment. Please do acknowledge with whom you collabo- rate, if anyone. Each person must hand in their own assignment. As described

in the syllabus, there will be a 50 % point penalty for an assignment handed in late.

1 The Household Problem for T = 2 (the Fisher model)

(6 points) Joe Six-pack just learned about the two period household maximization model and fell so deeply in love with it that he decides that he wants to live (i.e. consume) according to it. He is in the rst period of his life and he spends it in college. In college he works in the cafeteria where he makes $20; 000 after taxes. He knows for sure that he is going to get a job at McKinsey (he is an economics major) and will make $105; 000 after taxes in the second period of his life (sadly enough he only lives for two periods). He has no initial wealth and he can borrow and lend at an interest rate of 5%: His utility function is

U(c1; c2) = log(c1) + 0:5 log(c2)

1. (2 points) Determine Joe’s optimal consumption in both periods of his life. Is Joe a saver or a borrower? Determine his optimal level of savings (assets to be brought from period 1 to period 2).

2. (0.5 point) How would Joe’s optimal consumption and saving decision change if he had a utility function of the form U(c1; c2) = c1 c0:5

Justify your answer (note that this question can be answered without any calculations,but you have to remember certain facts about utility functions from your micro course).

3. (1 point) Back to Joe’s original utility function for the rest of the question. Suppose the interest rate increases to 10%: Now what is Joe’s optimal consumption and sav- ing/borrowing plan?

4. (0.5 point) Suppose the interest rate is back at 5%: The government wants to cut taxes to stimulate the economy. Suppose the government cuts the taxes that Joe has to pay in the rst period by $2; 000; so that Joe’s after tax income increases from $20; 000 to $22; 000: In order to nance this tax cut the government has to increase taxes in the second period by $2000 (1 + r) = $2; 100: Hence Joe’s income in the second period goes down from $105; 000 to $102; 900: What is Joe’s new optimal consumption and saving plan. Compare to your answer in Part 1.

5. (2 point) Suppose more generally that Joe’s utility is given by

U(c1; c2) =

c1

1 1

1

+

c1

2 1

1

where > 0 is a xed parameter. He has no initial wealth, and only income y1 in period 1. The interest rate is r. What can you say about the eect of a change in the interest rate on consumption c1, @c1 @(1+r)? How does this depend on the parameter ?

2 Two-Period Model with Labor Supply(9 points) Here we’ll solve for a representative household’s problem who lives two periods and gets disutility from working. Consider a household that lives for two periods and in each

period works, consumes, and saves/borrows. He solves:

max

c0;c1;l0;l1

log c0

l2

0

2

+

log c1

l2

1

2

subject to: c0 +

c1

1 + r1

= w0l0 +

w1l1

1 + r1

+ a0(1 + r0)

with

> 0. Here, c0 and c1 are consumption, l0 and l1 are labor eort, w0 and w1 are wages,and r0 and r1 are the interest rates.

1. (1 point) Here we don’t see assets appearing anywhere. What is given in the problem is the lifetime budget constraint that comes from two budget constraints (one for each period). Write out the budget constraints for each period that combine to generate the lifetime constraint.

2. (3.5 points) Solve the household’s problem, assuming a0 = 0. Here, a solution should be c0, c1, l0, and l1 in terms of only wages, interest rate r1, and parameters. Interpret how aects your results.

3. (1.25 point) Assume w0 = w1. Find and describe the consumption and labor supply proles (i.e., how each moves over the household’s lifetime) when

(a) 1

> 1 + r1

(b) 1

< 1 + r1
(c) 1
= 1 + r1
Present some intuition for your ndings.
4. (1.25 point) Assume w0 < w1. Find and describe the consumption and labor supply proles when
(a) 1
> 1 + r1

(b) 1

< 1 + r1
2
(c) 1
= 1 + r1
Present some intuition for your ndings.
You can read more about our case study assignment help services here.

## How it Works

#### How It works ?

**Step 1:- **Click on Submit your Assignment here or shown in left side corner of every page and fill the quotation form with all the details. In the comment section, please mention **Case Id** mentioned in **end of every Q&A Page**. You can also send us your details through our email id support@assignmentconsultancy.com with **Case Id** in the email body. **Case Id** is essential to locate your questions so please mentioned that in your email or submit your quotes form comment section.

**Step 2:-** While filling submit your quotes form please fill all details like deadline date, expected budget, topic , your comments in addition to **Case Id** . The date is asked to provide deadline.

**Step 3:-** Once we received your assignments through submit your quotes form or email, we will review the Questions and notify our price through our email id. Kindly ensure that our email id assignmentconsultancy.help@gmail.com and support@assignmentconcultancy.com must not go into your spam folders. We request you to provide your expected budget as it will help us in negotiating with our experts.

**Step 4:-** Once you agreed with our price, kindly pay by clicking on Pay Now and please ensure that while entering your credit card details for making payment, it must be done correctly and address should be your credit card billing address. You can also request for invoice to our live chat representatives.

**Step 5:-** Once we received the payment we will notify through our email and will deliver the Q&A solution through mail as per agreed upon deadline.

**Step 6:-**You can also call us in our phone no. as given in the top of the home page or chat with our customer service representatives by clicking on chat now given in the bottom right corner.

## Case Approach

#### Scientific Methodology

We use best scientific approach to solve case study as recommended and designed by best professors and experts in the World. The approach followed by our experts are given below:

**Defining Problem**

The first step in solving any case study analysis is to define its problem carefully. In order to do this step, our experts read the case two three times so as to define problem carefully and accurately. This step acts as a base and help in building the structure in next steps.

**Structure Definition**

The second step is to define structure to solve the case. Different cases has different requirements and so as the structure. Our experts understand this and follow student;s university guidelines to come out with best structure so that student will receive best mark for the same.

**Research and Analysis**

This is the most important step which actually defines the strength of any case analysis. In order to provide best case analysis, our experts not only refer case materials but also outside materials if required to come out with best analysis for the case.

**Conclusion & Recommendations**

A weak conclusion or recommendations spoil the entire case analysis. Our expert know this and always provide good chunks of volume for this part so that instructors will see the effort put by students in arriving at solution so as to provide best mark.

## Related Services

- Physics Assignment Help
- Chemistry Assignment Help
- Engineering Assignment Help
- Psychology Assignment Help
- Online exam Help
- Marketing Assignment Help
- Arts Assignment Help
- Sociology Assignment Help
- Project Management Assignment
- Case Study Help
- Nursing Assignment Help
- Research Assignment Help
- Operations Management Assignment help
- Accounting Assignment Help
- Biology Assignment Help
- Mathematics Assignment Help
- English Assignment Help
- Business Plan Help
- Essay Writing Help
- Human Resource Assignment Help
- Accounting Homework Help
- Computer Science Assignment Help
- Finance Assignment Help
- Economics Assignment Help
- Statistics Homework Help
- Management Assignment Help
- Strategy Management Assignment Help
- Auditing Assignment Help
- Information Management Assignment Help

- Online Assignment Writing help
- Humanities Assignment help
- Taxation Homework Help
- Corporate Finance Assignment Help
- Financial Management Assignment Help

5. (2 point) Assume now that w0 < w1 and 1 > 1 + r1. What happens with the con-sumption and labor supply prole if there are borrowing constraints (i.e. c0 w0l0).Compare your answer with the case without constraints.

3 Social Planner Problem and Steady States (5 points) Consider the social planner problem of the neoclassical growth model with loga-rithmic utility and full depreciation

max

fct;kt+1g1

t=0

X1

t=0

t log(ct)

subject to

ct + kt+1 = k

t

ct; kt+1 0 and k0 > 0 given

with ; 2 (0; 1)

1. (2 points) Derive the Euler equation by combining the rst order conditions with respect to ct; ct+1; kt+1.

2. (1 point) Find the steady state capital stock(s) and consumption level(s). How do they depend on the parameters ; ? Interpret your ndings.

3. (1 point) Suppose that k0 > 0. Is the capital stock increasing or decreasing over time?Where does it end up in the long run? How will your answer depend on the concrete value of k0?

4. (1 point) Suppose that the resource constraint becomes

ct + kt+1 = 2 k

t

How does your answer to question 2 change? This question can be answered without

repeating the math from questions 1 and 2, but you need to justify your answer.

**Product Code -Economics -Q55**

Looking for best Economics -Q55 online ,please click here