Question

An economy consists of two infinitely lived consumers named i = 1, 2. There is one nonstorable consumption good. Consumer i consumes ci t at time t. Consumer i ranks consumption streams by

Answer 1

consumption streams by ∑
`\beta ^(t) u c_(t1)`

where
`\beta` is increasing and is concave.

Step-by-step explanation:

The competitive equilibrium is a condition where profit is maximized for producers of the goods and utility is maximized for the consumers. The equilibrium price is set where quantity supplied is equal to the quantity demanded. This situation arises in competitive markets where market demand equals the market supply.