Lab 8_9_answers

In other words find and interpret these comparative

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: it indicates that the consumer is more patient). How does demand for c1 and c2 change with a change in period 1 income, , ? In other words, find and interpret these comparative static results. An increase in period 1 income, increases consumption in both periods. How does demand for c1 and c2 change with a change in period 2 income, , ? In other words, find and interpret these comparative static results. An increase in period 2 income, increases consumption in both periods. A8) What is her optimal amount of s? – – ****again not in your question set: How does her optimal amount of s change with y1, y2, r and δ ? – She saves more with an increase in period one income ( with an increase in period 2 income, . , the interest rate and . She saves less A9) How would we incorporate inflation in this model? What would be the effect of increasing inflation on period one consumption? On period 2 consumption? On savings? lowers period Inflation is reflected in an increase in period 2 prices; higher . An increase in 2 consumption, but leaves period 1 consumption and savings unchanged. This is a result of using the Cobb-Douglas utility function, and does not hold in general (recall, there are no cross-price effects in the reduced form demand equations when we i...
View Full Document

This lab report was uploaded on 04/06/2014 for the course ECON 301 taught by Professor Corinnelanginier during the Fall '07 term at Iowa State.

Ask a homework question - tutors are online