Answer to Question #48534 in Microeconomics for Yoyo
(a) Write out the equation for the household’s budget line and illustrate it in a diagram with Cp on the horizontal axis and Cf on the vertical axis. Identify the intercepts. What is the relative price (opportunity cost) of Cp? Identify it on your diagram.
(b) Supposethehousehold’spreferencesaresuchthatitchoosespositiveconsumptionineachperiod. Illustrate this choice with an indifference curve and identify the level of saving in your diagram. Comment on the household’s consumption pattern over time versus its income-earning pattern.
Need a fast expert's response?Submit order
and get a quick answer at the best price
for any assignment or question with DETAILED EXPLANATIONS!