What is the optimal consumption profile of the consumer

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Problem - Consider the following path of income of a consumer who lives for three periods.

t	1	2	3
Y_t	10	0	20
Table 1: Path of Income

Assume that the consumer is infinitely patient, β = 1, and that the interest rate is 0.

i) What is the optimal consumption profile of the consumer?

ii) What is the value of assets of the consumer at the beginning of period 3?

iii) Find the optimal consumption profile of the consumer assuming that the consumer is not able to secure a loan?

iv) What is the value of assets of the consumer at the beginning of period 3 in this case?

Reference no: EM132166597

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