Question: 2. Wealth effect on labor supply. Consider an agent that lives for two periods. In the first period, the agent is young and can work

2. Wealth effect on labor supply. Consider an agent that lives

2. Wealth effect on labor supply. Consider an agent that lives for two periods. In the first period, the agent is young and can work to produce a consumption good using technology y = 71-a - 1 - 0 where y is the amount of the good produced and I is the labor effort supplied by the agent. In addition, at the beginning of the period the agent is endowed with some quantity W of the consumption good. In the second period the agent is old and cannot work anymore. The agent has access to a savings technology that allows her to store some of the consumption good that was produced in period 1 and get it back in period 2 with some return r. The agent has preferences represented by: ci 11+v U (C1, C2,1) cz +B 1-0 1+v where and C2 are consumption in period 1 and 2, respectively, 0

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