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19. The consumer’s utility function is as follows; ?(?1, ?2 ) = ?1?2 where x1 stands...

19. The consumer’s utility function is as follows; ?(?1, ?2 ) = ?1?2 where x1 stands for the consumption level of good 1 in period 1 and x2 refers the consumption level of good 1 in period 2. The budget constraint for the consumer is; ? = ?1 + ?2 1+? where r is the interest rate. Find ?1 ∗??? ?2 ∗ (as functions of B and r) that maximize the utility. Check whether the second order sufficient condition is satisfied with the Hessian.

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Q UCX1, X2) = X, o X2, B.C. B=X1 + X 2 (48) By life time Income (Present value) then Max UCX, ₃X2) St B. C. ( + ) at Eqm MRS

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