57. Behavioral economics suggests that incentivizing people to save more of their income: A) entails manipulating the default options that relate to their employers' 401k plans B) is simply a matter of tricking them into thinking they have more income than they really have C) comes down to effectively analyzing the different asset classes available to investors D) all the above E) A & B only

57. Behavioral economics suggests that incentivizing people to save more of their income: A) entails manipulating the default options that relate to their employers' 401k plans B) is simply a matter of tricking them into thinking they have more income than they really have C) comes down to effectively analyzing the different asset classes available to investors D) all the above E) A & B only

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter3: Preferences And Utility

Section: Chapter Questions

Problem 3.9P

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Problem 4 - Costless Magical MacGuffinConsider a consumer that lives only for two periods. He works in period 1 (and gets income Y1) and moves up thecorporate ladder in period 2 (and gets income Y1 < Y2). This consumer has the usual preferences over time: u(C1) +βu(C2)Assume this consumer cannot borrow.1. What is the consumption in period 1 and period 2? Display graphically. Show the corresponding utilitycurve.Assume that now the consumer is allowed to save or borrow.2. Write down the new budget constraint. What is the consumption in period 1 and period 2? Displaygraphically. Could the consumer be worse off? Could the consumer be better off? Draw budget constraintssuch that for one of them consumer prefers to borrow and for the other - prefers to save.Assume once again that a consumer cannot borrow, but can borrow and immediately sell some ‘MacGuffins’, and in the next period, the consumer must buy back the MacGuffins to return to the lender. Assume that MacGuffins trade at P1 >…
Consider a consumer that lives only for two periods. He works in period 1 (and gets income Y1) and moves up the corporate ladder in period 2 (and gets income Y1 < Y2). This consumer has the usual preferences over time: u(C1) + βu(C2) 1. Assume this consumer cannot borrow. What is the consumption in period 1 and period 2? Display graphically. Show the corresponding utility curve. 2. Assume that now the consumer is allowed to save or borrow. Write down the new budget constraint. What is the consumption in period 1 and period 2? Display graphically. Could the consumer be worse off? Could the consumer be better off? Draw budget constraints such that for one of them consumer prefers to borrow and for the other - prefers to save. 3. Assume once again that a consumer cannot borrow, but can borrow and immediately sell some MacGuffins, and in the next period, the consumer must buy back the MacGuffins to return to the lender. Assume that MacGuffin t r a d e s a t P1 > 0 in the first period…
Assume Marco is initially borrowing and investing 100, with a return on investment of 50% and an interest rate on borrowing at 10%. The return on investment falls to 5%. Which statements are correct? Select one or more: A. Marco’s decision to continue to invest will depend on his preference between consumption today and consumption in the future. B. Marco will wish to invest and borrow, but he will be worse off than when the return to investment was 50%. C. If he continues to invest and borrow, the dashed line representing his new frontier will start at 105 on the y axis and be shallower than the solid red line, so he’ll continue to invest and borrow D. In the remaining questions, assume the central bank now cuts interest rates so that the real interest rate falls to zero. Marco will still not wish to invest and borrow. E. If he just invests his money in the bank instead, his frontier will cross the x axis at 100 and be steeper than the frontier if he invests.…
A person has a 2-period utility consumption function U(c1, c2), with a budget function W = c1+c2/1+ra. Explain with pictures how one should choose c1 and c2 such that MRS(from c1 to c2) equals 1+r.b. Also explain with pictures how when the individual receives income, whileconditions at that time was a crisis.
During any year, I can consume any amount that doesnot exceed my current wealth. If I consume c dollars duringa year, I earn ca units of happiness. By the beginning of thenext year, the previous year’s ending wealth grows by afactor k.a Formulate a recursion that can be used to maximizetotal utility earned during the next T years. Assume Ioriginally have w0 dollars.b Let ft(w) be the maximum utility earned during years t, t 1, . . . , T, given that I have w dollars at the be-ginning of year t; and ct(w) be the amount that should be consumed during year t to attain ft(w). By workingbackward, show that for appropriately chosen constantsat and bt,ft(w) btwa and ct(w) atwInterpret these results.
i will 10 upvotes urgent Say Anna's utility function is given by UA = MAMM, where MA is Anna's wealth and MM is Marie's wealth. Initially, Anna has 160 units of wealth and Marie has 40. When Anna maximizes her utility, her utility level is equal to: Multiple Choice 10,000. 5,000. 100. 200.
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5. Suppose interest rates are zero and the consumer's utility is u(c_{1}, c_{2}) = (c_{1}, c_{2}) while the two incomes are (y_{1}, y_{2}) = (75, 125) . Find the optimal consumption in each period , and also indicate what financial transactions the consumer makes . Show the answers on a diagram .
18. Declining MRSXY implies that:(a) The total utility is decreasing along an indifference curve(b) The consumer’s preferences do not satisfy the more-is-better principle(c) The consumer is willing to give up more and more X for additional Y as the consumption of X increases along an indifference curve(d) The consumer is willing to give up less and less X for additional Y as the consumptionof X increases along an indifference curve
Explain how does adecrease in the current income y affect the consumer’s consumption-saving decision. In particular,explain: 1) How will current consumption c, future consumption c′, and savings s change; 2) Arethere any substitution effect or income effect. Make sure you draw two figures, one for the borrowersand one for the lenders
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