Assume that you have income equal to £20 in each of two periods. Furthermore, you have the ability to both lend and borrow money at a 10% rate.
a)Draw the opportunity set and your indifference map.
b)Show the optimum amount of consumption in each period.
Assume the borrowing rate is 105 and the lending rate is 5%. Also assume your income is £100 in each period.
What is the maximum you can consume in each period?
What is the opportunity set?