Question

Consider Devah from the previous question. Suppose now that =0.5, but that the rest of the problem remains the same (including there being no interest on savings). Devah's optimal consumption in period 1 (c1) is $ , her optimal private savings (s) are $ , and her optimal consumption in period 2 (c2) is $ (enter only numbers in the blanks, and please round to the nearest whole number if necessary).

Answer 1

The question pertains to Economics, focusing on calculating optimal consumption and savings using the consumption function in the context of intertemporal choice. Without the specific income figures for Devah, numerical answers cannot be provided. In general, the calculation involves autonomous consumption, income, and the marginal propensity to consume.

Step-by-step explanation:

The subject of this question is Economics, specifically focusing on the concept of the consumption function and how it relates to intertemporal choice. Intertemporal choice involves decisions about consumption and savings across different periods. Given that the marginal propensity to consume (MPC) is 0.5 in the scenario, the optimal consumption in period 1 (c1), optimal private savings (s), and optimal consumption in period 2 (c2) can be calculated.

However, without the exact figures for income or the budget constraint that Devah faces, we cannot provide numerical answers. Typically, the consumption in period 1 would be the autonomous consumption plus the income multiplied by the MPC. Savings would be what remains after consumption in period 1 is subtracted from the income. Consumption in period 2 would be based on the savings and any expected returns, although the question states there is no interest in savings.