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Consider an individual who lives two periods. He works in both periods and receives a labor...

Consider an individual who lives two periods. He works in both periods and receives a labor income of 200 euros in the first period and 220 euros in the second. The interest rate of the economy is 10%. The consumption in period 1 is c1, and in period 2 it is c2. The price of the consumption good is 1 in both periods. The utility function of this individual is U(c1,c2 )=c11/2c21/2. Suppose there is a proportional tax on labor income of 1/11 (i.e., 9.09091%).

What are the optimal private savings in the first period?

Select one:

a. 18.181

b. 18

c. 9.09

d. None of the other answers is true.

e. 20

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