Question: The following figure represents the optimization problem for a home owner whose home is currently valued at $250,000. a) Identify the optimum consumption point (i.e.,

The following figure represents the optimization problem for a home owner whose home is currently valued at $250,000.

a) Identify the optimum consumption point

(i.e., what are the values of C1 and C2 at which this individual’s happiness is the highest possible)?

b) If the value of the home decreases to

$200,000, what is the optimum consumption point?

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