Derive the representative consumer's lifetime budget constraint and calculate (i) marginal rate of substitution between

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Derive The Representative Consumer S Lifetime Budget Constraint And Calculate I Marginal Rate Of Substitution Between 1 (72.35 KiB) Viewed 32 times

Derive the representative consumer's lifetime budget constraint and calculate (i) marginal rate of substitution between current period leisure and current period consumption (MRSI,c) (ii) marginal rate of substitution between future leisure and future consumption (MRST',c') (ii ) marginal rate of substitution between current consumption and future consumption (MRSc,c'). Assume the following: (a). the representative consumer works and consumes in the current period and the future periods; (b). The consumer has "h" units of time in each period and divides this time between work and leisure in each period; (c) let w denote the real wage in the current period, w' the real wage in the future period, and r the real interest rate; (d) the consumer pays lump-sum taxes to the government of T in the current period and T' in the future period; (e) The consumer goal is to choose current consumption, C, future consumption, C', leisure time in the current and future periods, I and I', respectively, and savings in the current period, Sp, to make himself/herself/themselves as well off as possible, given his/her/their budget constraints in the current and future periods: (f) the representative consumer is a price-taker who takes w, w', and r as given. Taxes are also given from the consumer's point of view.