According to the Random-Walk Hypothesis of Consumption under Uncertainty, individuals don’t need to optimise their consumption over time since the consumption is totally unpredictable” True or False?
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A: Hi, thank you for the question. As per the guidelines, we are allowed to attempt only first…
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Q: disposable income i
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A: please find below the answer.
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Q: Suppose that the economy is characterized by the following behavioral equations! C = 180 + 0.80Y, /=…
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A: Hi! Thank you for the question, As per the honor code, we are allowed to answer three sub-parts at a…
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Q: What is the consumption function for this economy?
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A: APS = -0.9
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Q: Calculate the propensity to consume.
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“According to the Random-Walk Hypothesis of Consumption under Uncertainty, individuals don’t need to optimise their consumption over time since the consumption is totally unpredictable” True or False?
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- Suppose an individual in the Grossman model is trying to decide what to have for dinner. His options are as below. Each dish has an effect on the level of home good Z and health H. Мeal Home good Z Нeath H Steak and eggs (A) Kale salad with broccoli (B) Entire box of cookies (C) +7 -2 -2 +5 +10 -20 Suppose the dinner's single-period utility function is U=3Z+H • If the individual is trying to maximize his single-period utility, and he can only select one item from the table (assuming he can afford any item in the table). Which meal would he choose? Please type in A, B, or C (do not enter space, punctuation, or any other symbols or words) • A miracle pill is discovered that halves the negative health impact of cookies. How does this impact the individual's choice? What meal would be chosen now? Please type in A, B, or C (do not enter space, punctuation, or any other symbols or words) • If the individual lives in multi-period rather than single-period, would he value Z or H more in…Nutritional economics. Suppose we are considering a hungry individual in the Gross-man model deciding what to have for dinner. His options are listed in Table 3.2. Each dish has an effect on the level of the home good Z and health H.a. Suppose the diner’s single-period utility function is as follows: U = 3Z + HIf the diner is trying to maximize his single-period utility, and he can only select one item from Table 3.2, which meal would he choose?b. A miracle pill is discovered that halves the negative health impact of cookies. How does this impact the diner’s choice?c. What effect does the miracle pill have on the diner’s health H? Interpret this result.Does this mean the diner would be better off without the miracle pill?d. If the diner is instead trying to maximize his lifetime utility and not just his single-period utility, how might your answer to Exercise 16(a) change? Is he likely to value Z or H more in the lifetime context than the single-period context? Explain your answer, and…What are the determinants for an individual demand? Derive with the help of indifferencecurves and the budget constraint the optimal consumption plan. How do you transfer theoptimal consumption plan into an individual demand function?
- How does savings change with changes in y1? Provide some intuition behind this result.Why does the ceteris paribus assumption allow economists to focus on the variable they are interested in? Give an example.Suppose that we have an economy with many identical households. There is a government that exogenously consumes some output and pays for it with lump sum taxes. Lifetime utility for a household is: U =InCt +ßlnCt+1 The household faces two within period budget constraints given by: Ct + St = Yt – Tt Ct+1 =Yt+1 -Tt+1 +(1+rt)St Use the Euler equation and intertemporal budget constraint to derive an expression for the consumption function. The government faces two within period budget constraints: (1) G_t + SG_t = T_t (2) G_(t+1) = T_(t+1) + (1 + r_t)SG_t In equilibrium, what must be true about S_t and SG_t?
- Fred is planning his consumption over two time periods. Fred's preferences for consumption in period and two can be represented by the following utility function: U(c,,c,) = C +(1+p) C" , where pis the subjective discount rate, and c;,c, is consumption in the first and second period. Fred's income in the first period is y, and grows by g % from the first period to the second period. Fred has access to perfect financial markets. The rate of interest is r>0. (a) Derive Fred's demand functions for consumption in the two periods as functions of p,r , y and g. (b) Derive Fred's demand for borrowing/saving as a function of p,r, y and g. (c) Give a condition involving the relationship between r and g for when Fred will borrow and when he will save.Consumers can choose between gas powered cars and electic cars. Suppose the price of gas increases by 25%. We can expect the price of electic cars to : Decrease Remain Unchanged Increase It is impossible to sayWhat is a probit model?
- Consider the 2-period household model that you have seen in class. Suppose the household wants to consume equal amounts in both periods. She earns $100 in the first period and $150 in the second period. The interest rate depends on whether she saves or borrows. The interest rate on saving is 1%, while the interest rate on borrowing is 10%. What is her optimal consumption? Note: Type in your answer approximated to two decimal points, i.e., your answer must be of the form "999.99". I will not be able to fix correct answers that were entered incorrectly, such as "999.999" or "999,99" or "999". In case the last digit in the correct answer is zero, e.g., "999.90" or "999.00", Blackboard will automatically delete it and you should not do anything about it.Why do behavioral economists consider it helpful to base a theory of economic behavior on the actual mental processes that people use to make decisions? Why do neoclassical economists not care about whether a theory incorporates those actual mental processes?Nutritional economics. Suppose we are considering a hungry individual in the Grossman model deciding what to have for dinner. His options are listed in Table 3.2. Each dish has an effect on the level of the home good Z and health H. a. Suppose the diner’s single-period utility function is as follows:U =3Z +HIf the diner is trying to maximize his single-period utility, and he can only select one item from Table 3.2, which meal would he choose? b. If the diner is instead trying to maximize his lifetime utility and not just his single period utility, how might your answer to Exercise 16(a) change? Is he likely to value Z or H more in the lifetime context than the single-period context? Explain your answer, and be sure to invoke the concept of a capital good