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1. Harvey Habit's utility function is U (c1, c2 ) = min {c1, c2} , where c1 is his consumption of
bread in period 1 and o, is his consumption of bread in period 2. The price of bread is $1
per loaf in period 1. The interest rate is 21%. Harvey earns $2,000 in period 1 and he will
earn $1,100 in period 2.
(a) Write Harvey's budget constraint in terms of future value.
(b) How much bread does Harvey consume in the first period and how much money does
he save?

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Question: More about Harvey (15%) Harvey Habit's utility function is still U(ci,C2)-min(c2, where the arguments are the... View the full answer

1C3ED443-3A33-4056-A9FA-A95C00713302.png

Cit C 2
1+0.21
2000 + 1100
1+0:21
C1 + 0. 826 (2 = 2000 + 909. 090
CI + 0. 826 62 = 2909. 09
6. Since utility fhis Min ( C., (2)
So C , = C2
By putting condition C, = 62 in budget Constraint
( 1 +...

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