The Intertemporal budget Constraint Only $m2 will be available in period 2 to pay back $b, borrowed in period 1 So b,1+r)=m That is, b=m2/(1+r) So the largest possible period 1 consumption level is n c1=m1+ 2 1+r
The Intertemporal Budget Constraint Only $m2 will be available in period 2 to pay back $b1 borrowed in period 1. So b1 (1 + r ) = m2 . That is, b1 = m2 / (1 + r ). So the largest possible period 1 consumption level is c m m r 1 1 2 1 = + +
The Intertemporal budget Constraint e2,(c1,c2)=(m2+(1+rm) m。 is the consumption bundle when all (1+rm1 period 1 income is saved. 2 o the present-value of 1 the income endowment 00 mA my m 1+
The Intertemporal Budget Constraint c1 c2 m2 0 m1 0 is the consumption bundle when all period 1 income is saved. (c1 ,c2 ) = (0,m2 + (1+ r)m1) m r m 2 1 1 + ( + ) m m r 1 2 1 + + the present-value of the income endowment
The Intertemporal budget Constraint Suppose that C, units are consumed in period 1. This costs Sc, and leaves m-C saved. period 2 consumption will then be c2=m2+(1+rm1-c1)
The Intertemporal Budget Constraint Suppose that c1 units are consumed in period 1. This costs $c1 and leaves m1 - c1 saved. Period 2 consumption will then be c2 = m2 + 1+ r m1 − c1 ( )( )
The Intertemporal budget Constraint Suppose that C, units are consumed in period 1. This costs Sc, and leaves m-C saved. period 2 consumption will then be 2=m2+(1+r(m1-c1) which is -(1+rc1+m2+(1+rm1 slope intercept
The Intertemporal Budget Constraint Suppose that c1 units are consumed in period 1. This costs $c1 and leaves m1 - c1 saved. Period 2 consumption will then be which is c2 = m2 + 1+ r m1 − c1 ( )( ) c2 = − 1+ r c1 + m2 + 1+ r m1 ( ) ( ) . slope intercept