6. Assume you have income of $5,000 in each of two periods and can lend at 10% but pay 20% on...

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6. Assume you have income of $5,000 in each of two periods and can lend at 10% but pay 20% on borrowing. What is your opportunity set?

7. Assume your preference function P is P = C1 + C2 + C1C2. Plot the location of all points with P = 50, P = 100.

Rochak · Accepted Answer

Answer 6:
The opportunity set is the consumption that you have in each period. 
Let C1 and C2 denote the consumption in the 1st period and 2nd period respectively. Therefore, the opportunity set will be:
C1 + (C2 / (1+10%)

6. Assume you have income of $5,000 in each of two periods and can lend at 10% but pay 20% on borrowing. What is your opportunity set? 7. Assume your preference function P is P = C1 + C2 + C1C2. Plot...

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