Please no written by hand solutions 2. (Consumption and savings)Consider an economic agent who is going to live for two periods. For each period, his utilityfunction is:{{His current income is yo = 1000, risk-free rater and discount factor ó are equal to zero.How much will this agent save at time - 0:un (₁)if & ≤ 1000500+ if > 1000Cta) if y1000 with certainty;b) if y800 with certainty;c) if y = 1200 with certainty;d) if y, is a random variable: = 800 with probability 1/2, or 1200 with probability 1/2?Does he make precautionary savings?

Utility functionWhen Ct≤1000U=CtWhen Ct≥1000U=500+0.5*CtY0=1000risk free return= r

Consider an economic agent who is going to live for two periods. For each period, his utility function is: u₂ (₁) { 1000 with certainty; b) if u 800 with certainty; C₁ if ≤ 1000 500+ if > 1000 } His current income is yo = 1000, risk-free rate r and discount factor & are equal to zero. How much will this agent save at time 0:

Consider an economic agent who is going to live for two periods. For each period, his utility function is: u₂ (₁) { 1000 with certainty; b) if u 800 with certainty; C₁ if ≤ 1000 500+ if > 1000 } His current income is yo = 1000, risk-free rate r and discount factor & are equal to zero. How much will this agent save at time 0:

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

TECHNICAL Suppose that permanent income is calculated as the average of income over the past five years – that is YP = (Y + Y-1 + Y-2 + Y-3 + Y-4 Suppose further that consumption is given by C = 0.9YP a. If you have earned $20000 per year for the past 10 years. What is your permanent income? b. Suppose that next year (period t + 1) you earn $30000. What is your new YP? c. What is your consumption this year and next year? d. What is your short run MPC and long run MPC? e. Assuming you continue to earn $30000 starting in period t+ 1, graph the value of your permanent income in each period using the initial YP equation provided above.
4. A factory produces a certain type of outputs by three types of machine. The respective daily production figures are : Machine I : 3,000 Units; Machine II : 2,500 Units; Machine III: 4,500 Units Past experience shows that 1 per cent of the output produced by Machine I is defective. The corresponding fraction of defectives for the other two machines are 1-2 per-cent and 2 per- cent respectively. An item is drawwn at random from the day's production run and is found to be defective. What is probability that it comes from the output of (i) Machine I, (ii) Machine II, (iii) Machine (iii) ?
Assume that an individual expects to work for 40 years andthen retire with a life expectancy of an additional 20 years.Suppose also that the individual’s earnings increase at a rateof 3 percent per year and that the interest rate is also 3 percent(the overall price level is constant in this problem). What(constant) fraction of income must the individual save ineach working year to be able to finance a level of retirementincome equal to 60 percent of earnings in the year just priorto retirement?
2.) JK Chemicals have just finished the construction of a new chemical manufacturing plant overseas and is beginning to purchase raw materials to use in the manufacture of its products. Due to stiff competition and limited supplies, the company can only adopt one manufacturing strategy for the plant. An economic study had suggested the possible profits of the company according to different economic conditions; growing, stable and declining. Which manufacturing strategy should the company adopt? 1. Use the Maximin Criteria 2. Use the Maximax Criteria 3. Use the Hurwicz Alpha Criteria, alpha=0.75 4. Use the La Place Criteria Manufacturing Strategy Growing Economy Steady Economy Declining Economy $2,340,000 $896,000 $1,890,000 $950,000 $1,600,000 $700,000 $2,000,000 $780,000 $990,000 $789,000 $899,000 $500,000 $600,000 $345,000 $870,000 $213,400 $214,500 $234,800 $213,000 $500,000 A -874,300.00 100,000.00 -200,000.00 123,900.00 -100,000.00 200,000.00 -555,000.00 123,000.00 -1,000.00…
12. Answer please do;!
3. Present value can be used to determine the fair price -or value - of a bond. In the examples that follow, assume you are working with zero-coupon bond and that there are no transaction costs. A zero-coupon bond is one that pays all interest and the principal when the bond matures. For example, suppose somebody offers to sell you a bond that will pay a future value of $225 – interest included - when it matures in two years. If the current market interest rate is 3%, then what would be a fair price for you to pay for this bond? a. The value of a bond changes whenever the current market interest rates change. For example, suppose you bought a bond in 2015 that promises to pay you 5% annual interest until it matures in 2020. The value of your bond (i.e., the price that you can sell it for if you choose to sell it before maturity) will change if the market interest rate changes. To understand why, work through the following examples. b. Suppose you purchased a bond for $181.82 that will…
3. (a) Consider the below displayed value functions of two people, Person A (Fig- ure 1) and Person B (Figure 2). The scale of the axes is the same in both figures. f Figure 1: Person A (i) + Compare the two persons regarding all of their preferences that you can speak to based on these figures. Figure 2: Person B (b) In prospect theory, imagine a person who is loss averse, but neither risk averse nor risk seeking. How would their value function look like? Describe in a way that would allow someone to draw the value function. (c) In Greater Anglia trains, going for example from London to Colchester, you can find the following sign (see Figure 3). explain. A PENALTY FARES You may be liable to pay a Penalty Fare if you travel without a valid ticket. A Penalty Fare is £100 plus the price of the appropriate single fare for your intended journey. However, if it is paid within 21 days, the Penalty Fare is reduced to £50 plus the price of the single fare. Explain why the company uses the…
b. x= y2 - 4 3. P5-4-3-2-1 2. 3 el S 6 3) 1) Function? YES or NO Domain , Range thani you-Zoom Quiz Module 8 Qua 3 M Please see attached Filing x document com/courses/49637/quizzes/274167/take M Gmail B Translate For the following information, how much eggs will this consumer buy? You may assume they can buy fractions of goods. They will never buy more than 3 of any one item. Price Candy $2, Price Milk = $1, Price Eggs $0.50, Income $6. %3D Candy Milk Eggs 1st Bag or Carton 14 18 12 2nd Bag or Carton 10 3 2 3rd Bag or Carton 3 1 01 03 O 1.5
Assume that the parcels are essentially identical and that the minimum selling price of each is $575,000. The following table states each person's willingness and ability to purchase a parcel. Willingness and Ability to Purchase Person (Dollars) Andrew 520,000 A-Z Beth 510,000 Lorenzo 750,000 Neha 660,000 Sam 600,000 Teresa 550,000 Which of these people will buy one of the three beachfront parcels? Check all that apply. O Andrew Beth O Lorenzo O Neha O Sam O Teresa Assume that the three beachfront parcels are sold to the people that you indicated in the previous section. Suppose that a few days after the last of those beachfront parcels is sold, another essentially identical beachfront parcel becomes available for sale at a minimum price of $535,000. This fourth will nurchase it from the seller for at least the minimum ncice be sold because parcel MacBook Air F12 O O O
2. An executive receives an annual salary of P600,000 and his secretary an annual salary of P180,000. A certain task can be performed by the executive working alone in 4 hours. If he delegates the task to his secretary it will require him 30 mins to explain the work and another 45 minutes to check the finished work. Due to the unfamiliarity of the secretary to do the task, it takes her an additional time of 6 hours after being instructed. Considering salary cost only, determine the cost of performing the task by each method if the secretary works 2,400 hours a year and the executive 3,000 hours a year.
10 co Interest Rate (%) N B Investment Demand O E 0 $30 60 90 120 150 Investment ($) Price Level 0 AS Q₁ Real GDP ($) AD, (I=120) -AD₂ (I=90) *AD, (I=60) Refer to the above graphs, in which the numbers in parentheses near the AD₁, AD2, and AD3 labels indicate the level of investment spending associated with each curve, respectively. All numbers are in billions of dollars. The interest rate and the level of investment spending in the economy are at point C on the investment demand curve. To achieve the long-run goal of a noninflationary full-employment output Qf in the economy, the Fed should: decrease aggregate demand by increasing the interest rate. make no change in the interest rate. increase aggregate demand by decreasing the interest rate. increase aggregate demand by increasing the interest rate.
The demand D (in billions of £) for a bond with coupon rate 5% and face value FV = 1000, andtwo years to maturity as a function of its price P is D = 4000 − 2P. The supply in (billions of£) as a function of the price of the bond is S = 2P + 400. b) Suppose that the yield to maturity of the bond is i = 0.05. What is the quantitydemanded/supplied at this interest rate? What happens to the demand/supply of the bond asthe interest rate increases? Explain why. c) What is the equilibrium interest rate?