Suppose you are given y > 0,3/2 = 0, a = 0,r> 0. What would happen...

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Suppose you are given y₁ > 0,3/2 = 0, a₁ = 0,r> 0. What would happen to the opportunity set if i) the first period endowment y, increases or ii) the market interest rate (r) decreases? You should answer this question by drawing a figure (you can use pen and paper). Be sure to define the intercepts and slope of the opportunity set in each case. Please also answer this question in general terms. Suppose you are given y₁ > 0,3/2 = 0, a₁ = 0,r> 0. What would happen to the opportunity set if i) the first period endowment y, increases or ii) the market interest rate (r) decreases? You should answer this question by drawing a figure (you can use pen and paper). Be sure to define the intercepts and slope of the opportunity set in each case. Please also answer this question in general terms.

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In general terms the opportunity set in a twoperiod consumption model represents the combinations of ... View the full answer