= First, consider the following maximization problem in which borrowing is not allowed. Max, u = log(c) + Blog(cz) subje

[answerhappygod]

First Consider The Following Maximization Problem In Which Borrowing Is Not Allowed Max U Log C Blog Cz Subje 1 (72.95 KiB) Viewed 78 times

= First, consider the following maximization problem in which borrowing is not allowed. Max, u = log(c) + Blog(cz) subject to: 41.C2,6,2 G1 +z = w (budget constraint in period 1) Cz = qaz (budget constraint in period 2) z20,4 > 0,c2 > 0 (non-negativity constraints) where u is the utility function, B is the discount factor, w is the wage income in period 1, q is the price of capital, a is the production technology, 9 and Cz are the consumption levels in period 1 and 2, and z is the investment in period 1. Assume the following parameter values: B = 1, w = 2, 9 = 2, a = 1 Q1: Derive the optimal value of c. Q2: Derive the optimal value of cz. Q3: Derive the optimal value of z.