Becky shelton, a teacher at kemp middle school, is in charge of ordering the t-shirts to be sold for the school’s annual fund-raising project. the t-shirts are printed with a special kemp school logo. in some years, the supply of t-shirts has been insufficient to satisfy the number of sales orders. in other years, t-shirts have been left over. excess t-shirts are normally donated to some charitable organization. t-shirts cost the school $7 each and are normally sold for $14 each. ms. shelton has decided to order 830 shirts. required if the school receives actual sales orders for 760 shirts, what amount of profit will the school earn? what is the cost of waste due to excess inventory? if the school receives actual sales orders for 860 shirts, what amount of profit will the school earn? what amount of opportunity cost will the school incur?

3. saving two consumers, larry and jeff, have utility functions defined over the two periods of their lives: middle age (period zero) and retirement (period 1). they have the same income in period 0 of m dollars and they will not earn income in period 1. the interest rate they face is r. larry’s and jeff’s utility functions are as follow. = 0.5 + 0.5 and = 0.5 + 0.5 for each person is between zero and one and represents each consumer’s temporal discount econ 340: intermediate microeconomics. ben van kammen: purdue university. rate. a. write the budget constraint that applies to both jeff and larry in terms of consumption in each period and ), interest rate, and m. b. what is larry’s and what is jeff’s marginal rate of intertemporal substitution? c. what is the slope of the budget constraint? d. write each consumer’s condition for lifetime utility maximization. e. re-arrange the conditions from part (d) to solve for the ratio, . f. if > which consumer will save more of his middle age income? g. if > 1 1+ , in which period will larry consume more: = 0 or = 1?