This is based on the lecture note on the first model with land speculation. The utility...
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This is based on the lecture note on the first model with land speculation. The utility maximization problem of each young person is given by max V₁ = log(C₁t) + Blog(C₂t) Cit. Cztikt+1 subject to C₁t+kt+1+Ptxt = Wt C2t = (Rt+1+1-8)kt+1+ (he+1+Pt+1)xt C1t > 0, C2t> 0, kt+1 ≥ 0 Solve the maximation problem and derive the followings: (1) Optimal values of C₁t. (2) Optimal values of Czt. (3) Optimal values of kt+1+Ptxt. (4) Derive the non-arbitrage equation between holding capital and land (5) Is welfare (Ve) increased with an increase in we? Yes or NO? (6) Is welfare (Ve) increased with an increase in Rt+1+1-8? Yes or No? This is based on the lecture note on the first model with land speculation. The utility maximization problem of each young person is given by max V₁ = log(C₁t) + Blog(C₂t) Cit. Cztikt+1 subject to C₁t+kt+1+Ptxt = Wt C2t = (Rt+1+1-8)kt+1+ (he+1+Pt+1)xt C1t > 0, C2t> 0, kt+1 ≥ 0 Solve the maximation problem and derive the followings: (1) Optimal values of C₁t. (2) Optimal values of Czt. (3) Optimal values of kt+1+Ptxt. (4) Derive the non-arbitrage equation between holding capital and land (5) Is welfare (Ve) increased with an increase in we? Yes or NO? (6) Is welfare (Ve) increased with an increase in Rt+1+1-8? Yes or No?
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Optimal values of Ct The optimal values of C1t are those that maximize the utility function given the constraints The first order conditions for a max... View the full answer
Related Book For
Quantitative Methods for Business
ISBN: 978-0324651751
11th Edition
Authors: David Anderson, Dennis Sweeney, Thomas Williams, Jeffrey cam
Posted Date:
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