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Week 7%
Dynamic C \ater~ Nemporal) Medel
= Consumers
Budget Constraint
ors ty, ow Curent B.C.
\
was ia
income in the firot awed
the \* pied ea!
Sovcing,
ca = yt Claeds C2) Futere ®.C.
\
qareces cole
> ss Carga C8)
Clee)
Plog (8) into C1)
Cit C2 -42 =
: Car) J
oe a | ey + 2) cw)
‘ ct
| Clee ae
Pv 4 lg teme
\i ee Fine Gatere
NV a Nge time income
tempt)
bedback const - Pregecences
o Presecenas reaerted by a welle defined
ett Gots “t q “
« More DY Less => uC.,.) shall be pei-
toncave
&
o Direnity = UC.,.) eat ane
a oT 6
ey and ca are NOEMAL > husce dizteedaalle,
Max ulcer)
yea
s& Cit So se ye
ler
4h
\wer
Dulce) = UY Ceyer) = MU,
og
Qu Ceayey) e wy Geyer) = Meg,
dew
Mor (2 wluserde > Lava ~ Gece
eyyer, > eet - qe : | 2b <0 , 2h 20; ah <0
Ocr a>
DL +0 > VU Cajed - >2 0
au
av, Corse) & DP 5)
gh P-r) Va Ceayerd i a =O
Oey ler
> valeve) =r (6)
var
ab <0 c * (3)
= 4 4 re = 4 -
5) ge) 3 UV, Coser) oe VY, Cerner)
lee
.
Yy Coupes e lar” ©
Ua Ceyer)
MES Uyleyerd 2 \e
Uz Ceryon)
MRS yer
iE = Vater kemporal, mes”
ln order to increase future cons. by Cur) unit, need To socerpie.
\ unit conse badeg | later - Nengoral hee.
ey + £) 5 _ * 9s
lee lee
+ Find ead potats C mos peal cons)
250 Ge pt yer
ler
e120 > ea Cledyrt ye
o Find endowmnt points ve 20
eptseygy dD Gey whe £20
ene je +Cleeds . fine seo » cusye
consumer Blender Cer S yy) ire. 890
Slopes = Clee)
oh
Cer) yuega
ndowmek port Ce)
consumer is borrower
Cady) te s [sega -cress J
ter, ler lar
F.o.c¢. a
au 10> Dar a> begs)
on
a
ak 29 > 4 a «~ 2 Ceq. ct)
oer 2 lee
oS yr ye Fue ee (eq, ot)
o> lac \ac
. lel;
tans md & D Pa 3 Cr) a ee
2
Coes Clee ag ) Cea iv) thy «4s Cie) inte op, tw)
= 21 r
ee . ome =: i; x Lee
optional iest- pew
cons demmend f
int gered ~ ene Cee) L Tyre as
An weal Tate at le
awe eo tire,
\neme tn grant volve opine Second pero?
tema, daste besent madly,
Jecord ported
shod ¢ =
wns
ra t ©
Val, Nap bre,
iotente, LY he Toke
ques
Pourcy - ANALYSIS
qed 1 +4
2 3 oe) sem bn- Say
seeped Cae) rye ‘
ss Sen Some 4
2 ver
nae
seyra > ss s( 4i- oe)
o Whet henge X Curruk Savome Op) iaveases?
oe
+ Whet happes ig qeton javems lye) incrcenes °
* ab .
oTey 2 Ter - vs
Seeyie db Cs +a)
2 le we hopes S aad je intevase ?
Permanent lacame Hy prthess by Millen Frsedman!
« Tempero chenges in income gields saell chores
te cwrent was!
Perma t cloyes i on” ane larger
2
la ove model x Change in gy rtqus to "tunporeg” choye
Changs ny mye ftp te “pomnet” chmage «
chonges fe tureeat exons
Temporary change (fy) > ta, Ta, Ts
Permannt clorge C44, d tyr.) 2) Tey, er) ths
eye 4 aaa +
underomned |
L What hegpos i Mite
fe > Cheaper fie coos"
Let ¢ incramses 4re0n ctor fs OE
e+ fn & yt By ¢ te.c)
lar lee
. s_ghh_ gh Crew Ie.c)
l4e"
Find end points:
sO d cye Cled gr eye Cre.)
20D ere Cle Dy eye Caen r-¢.¢)
ard gc aye ae (3.6.0)
ar
ego dD tre yt Qe Canes £-6.¢)
Vere
Slope = Clee °)
w
Clee?
_ => aes slope changes
to chage ar
=: ot ” Sest. EFF”
Maree! 1
Cla) yreqa,
§2
flops 2 = Clee) CASE OF Lewosa Oso)
a
Clee Dgrege
Cedgiega
%
Moving A-t-d + Subst. atte
Ps O- te B~ lacome eggect
tee 7 te > cheeper ~ he (atts
NS fe > Mier inceme Re
CASE 0& boehOwSe
ta
— fe 3 chuge ce D hee Yate
oo ~y te olf Nae - insome b eo @ Nater. Kemporal mokl with gpivemend '
Consumes problem
5 " ra jaunt
Veiod Ua 4s e yet
xoteS
Qed 2, eae ya -ta2 + Ces >
Ss 422 Sa ++y
lee
I-bec. Cs en \a pete ro - &
te
\aer ler
i
vw Ka Ww “ n ae
os uy
Race Cel) setae eee ge
Max S&< wt elit +> Lye ys - habe oy
CryCe,> \ee Nie
- &&
Vee
Fots > ce 4D tye on tyr tr]
avo ie, + ia Ly-tar ] Cove eumenst
Gy vais Os quds in peed |
we fa ntact t
oo 4 pow ia a
Ty Aggregate tenes in peed 4
Taio tx__In ved 2
Tt e nN. &
yw “ tenes pad eAcK
“ee ; r e wady,
Tow Nt,
\f Revers < E xpuditwes % Betton
Ussuing Bown s|!
Gov isses beads CB) Vn ford 1
Petod 4. G, =< Ty +B
Z Z got © borrowing (te af ae)
on" wl
dae rea.
Rens 2, Gre l = Ta Db Trobe
or i bts ? Ter
tr Gov's tec:
Gie+ Gee Ti+ TH
lec ler
aca an
ov of gpv- exp. PY of foxes
Competitn EQ
~ Each conseme optionlly chooses Gy and cg
- Gov bc. shovld hold!
~ Cndt meet chez, Sak
4199+ seu'g ¢ nd t
RicAteraw GaVIVALECE —“THeOesm)
SA chap is Hing of teres ove NeuTend |! *
— © will not choge
aha of faal
tong 1! a
ATAX GT Is wot A Feee Wucetot Ty = Ny
Tae Nite
Gov I8C : Git6g 2 Ti+ Te >
(te ler
=
saa er
tit b20 2 a. 6
? te L ear
ow
Piv of taxes gard by
A Single indv's share a¢
an indnibe C
gev's sposy tn BV tems.
Contemn's 1.8.6 PV of Nev (M Come
+4 eb 2
= + yt - | ret
al aed eae
Ite
unS wre mnt
Py +f Cons. ex ee i
before ‘bea Pv og toeas
avers 4
Rewnt conten “os IBC pes
= eye ye ol See Ce
te ON he © Now assume Femang eves chen, |
ala the Geek ped each indy. 9°) fn 4a £45
ale the standin ym gay mare tax Clee
N(Ct-4) +N Coecrnad -
Clee)
Nu NA + Nin + NA =f Nt + Nee
tee \aec
@ A change #9 timins, 4 tones did not choye the
gps fee. G4 Ge cs Ne + NEL
lee lee
+ Stauth i He cae, He Wate Vic dh nt choy,
© Opkoel —cr and er ww! aot chee!
© Riwden &. Thown: A chaye > timing
+1 tares wll aot theye C md ems eollocotoas
gina iadevideelg and goes thes will nt
Change ie
