Life Cycle Theory of Consumption
Life Cycle Consumption Problem
Problem Statement The life cycle consumption problem is a generalization of the three-period life cycle problem in that the number of periods can vary from 1 to \(n\). Since the number of periods is variable in the general life cycle problem, the model takes as input a wage function instead of a set of discrete...
Life Cycle Consumption Problem with Assets
Problem Statement In the Life Cycle Consumption Problem, the lifetime budget constraint restricted consumption in equating the present value of consumption to the present value of wage income. The Life Cycle Consumption Problem with Assets extends the Life Cycle Consumption Problem in that the consumer is allowed to have assets, i.e., the consumer can borrow...
Life Cycle Consumption with Assets and Labor Supply Problem
Problem Statement In the Life Cycle Consumption with Assets Problem, we extended the basic model to allow the consumer to borrow and save. The Life Cycle Consumption with Assets and Labor Supply Problem further extends the basic model to include labor decisions. In the previous models, the wage income in each period was a function...
Three-Period Life Cycle Problem
Problem Statement Joey, a recent college graduate, has just started his first job and is trying to be smart in managing his finances for the next several years. Given his wages and some basic knowledge about the state of the economy, Joey would like to calculate how much he can spend each year (consume) on...