Assume Peter's preferences over time (periods are yearly) are given by U(c1, C2, C3, C4, · ...) = ln(c1) + Bln(c2) + B²ln(c3)+... Assume that Peter can borrow or lend at the same rate r=10% and 1 B = 1.15 Then, we know the following about how Peters consumption changes over time: Peters consumption declines the older he gets. Peters consumption increases the older he gets Peters consumption is constant over his life-time We can't tell anything about his consumption level because we have not been given any information about his income over his life-time.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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Assume Peter's preferences over time (periods are yearly) are given by
U(c1, C2, C3, C4,
...) = In(c1) + Bln(c2)+ B²ln(c3)+...
Assume that Peter can borrow or lend at the same rate r=10% and
1
1.15
Then, we know the following about how Peters consumption changes over time:
Peters consumption declines the older he gets.
Peters consumption increases the older he gets
Peters consumption is constant over his life-time
We can't tell anything about his consumption level because we have not been
given any information about his income over his life-time.
Transcribed Image Text:Assume Peter's preferences over time (periods are yearly) are given by U(c1, C2, C3, C4, ...) = In(c1) + Bln(c2)+ B²ln(c3)+... Assume that Peter can borrow or lend at the same rate r=10% and 1 1.15 Then, we know the following about how Peters consumption changes over time: Peters consumption declines the older he gets. Peters consumption increases the older he gets Peters consumption is constant over his life-time We can't tell anything about his consumption level because we have not been given any information about his income over his life-time.
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