A consumer's consumption in the present and future consumption is given by u(c1, c2) = {c1(c1+c2)}^1/2....

 

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A consumer's consumption in the present and future consumption is given by u(c1, c2) = {c1(c1+c2)}^1/2. The consumer has an income of Rs. 2000 in period I and Rs. 1200 in period II. If the rate of interest is 20%, find his optimum for two periods. (B) Chitra's utility from work and leisure is given by U(R, C) = 8 (R)^1/2 + C. She has 80 hours to allocate between work and leisure and she does not have any other source of income. The price of the consumption good is Rs.1 and initially the wage rate is Rs. 2 per hour of work. (i) Write down her equation of budget line. (ii) Determine her optimal bundle of consumption and leisure. (iii) If the wage rate increases to Rs. 4, then decompose the total price effect into substitution, income and endowment effect. (C) Suppose economy has a production function of the form, q = Ae, OtK a L 1-a, where t denotes time and time is continuous. Find the growth rate of the technology, given the share of rental income from capital in GDP is 30 percent. Also, given that the growth rate of capital is 1.5%, growth rate of labor is 1 percent and the growth rate of output is 2.75 percent. A consumer's consumption in the present and future consumption is given by u(c1, c2) = {c1(c1+c2)}^1/2. The consumer has an income of Rs. 2000 in period I and Rs. 1200 in period II. If the rate of interest is 20%, find his optimum for two periods. (B) Chitra's utility from work and leisure is given by U(R, C) = 8 (R)^1/2 + C. She has 80 hours to allocate between work and leisure and she does not have any other source of income. The price of the consumption good is Rs.1 and initially the wage rate is Rs. 2 per hour of work. (i) Write down her equation of budget line. (ii) Determine her optimal bundle of consumption and leisure. (iii) If the wage rate increases to Rs. 4, then decompose the total price effect into substitution, income and endowment effect. (C) Suppose economy has a production function of the form, q = Ae, OtK a L 1-a, where t denotes time and time is continuous. Find the growth rate of the technology, given the share of rental income from capital in GDP is 30 percent. Also, given that the growth rate of capital is 1.5%, growth rate of labor is 1 percent and the growth rate of output is 2.75 percent.

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ANSWERS A Optimal consumption for two periods c1 20001212 c2 12001212 B i ... View the full answer