Question

Analyze the baseline economy consisting of two goods, two periods, and two representative consumers with endowments.

Xavier has Cobb-Douglas preferences over consumption today and tomorrow. U%(C1, C2) = .51 ln(C7) +.49 ln(C2).
He begins with an endowment of 1000 pounds for consumption today and 1000 pounds for consumption tomorrow (Ei=E2=1000). Note that people consume three to five pounds of food per day so 1,000 per year is a reasonable value. Well, at least it is a nice round number.
Yuri also has Cobb-Douglas preferences but is slightly more impatient (less patient) than Xavier is. U'(C1, C2) = .52 In(C1) +.48 ln(C2).
He starts with the identical endowment of 1000 pounds for consumption today and 1000 pounds for consumption tomorrow (Ei=E2=1000).

Answer 1

In economics, individuals make consumption choices based on their utility and budget constraints.

Step-by-step explanation:

Yelberton will compare the different choices along the budget constraint and choose the one that provides him with the highest utility. By considering marginal changes toward more or less consumption, he can seek out the choice that will provide him with the highest level of utility.