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  3. 1. solve for the optimal values of c1 and c2 in th

1. Solve for the optimal values of C1 and C2 in the following optimization problem: MaxC1,C2...

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Advance Math

1. Solve for the optimal values of C1 and C2 in the followingoptimization problem: MaxC1,C2 C11/2 +βC21/2

s.t. C1 + C2 /1 + r = Y1 +Y2/1 + r

Hint: ∂C1/2 /∂C = 1/2C−1/2

When r goes up, how does C1 change? Does it increase ordecrease?

Answer & Explanation Solved by verified expert
3.8 Ratings (420 Votes)
SOLUTIONGiven That the data isthe optimal values of C1 and C2 in thefollowing optimization problem Max C1C2C112C212ANDst C1 C2 1 r Y1 Y21 rHint C12 C 12C12SO According to this problem the consumerreceives an income in periods 1 and 2    See Answer
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