Buzz is a chicken farmer.His earnings will be $100 this year and $100 next year.He can lend money at an interest rate of 20%.Because of a subsidized loan program for chicken farmers, he can borrow money at an interest rate of 10%.No matter what he borrows or lends, his earnings will still be $100 each year.
a.If he is not allowed to either borrow or lend, draw a graph showing his budget between consumption this year and consumption next year.Put numerical labels on the vertical and horizontal intercepts of the budget set.
b.Suppose that Buzz is allowed to borrow up to the present value of next year's earnings at 10% and is also allowed to make loans.Draw Buzz's budget constraint in this case.

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The Answer of Buzz is a chicken farmer.His earnings will be $100 this year and $100 next year.He can lend money at an interest rate of 20%.Because of a subsidized loan program for chicken farmers, he can borrow money at an interest rate of 10%.No matter what he borrows or lends, his earnings will still be $100 each year.
a.If he is not allowed to either borrow or lend, draw a graph showing his budget between consumption this year and consumption next year.Put numerical labels on the vertical and horizontal intercepts of the budget set.
b.Suppose that Buzz is allowed to borrow up to the present value of next year's earnings at 10% and is also allowed to make loans.Draw Buzz's budget constraint in this case.

Buzz Is a Chicken Farmer