The diagram below depicts Marco’s choice of consumptions in periods 1 and 2. He has $100 worth of grain in period 1 and no income in period 2. Marco has two choices. In scheme 1, he can sell the grain that he does not consume and lend the money at 10%. In scheme 2, he can invest the grain that he does not consume (e.g., planting as seed) for a return of 50%. Which of the following statement is correct? [ Only One Option correct ] GIVE EXPLANATION FOR EACH OPTION.
A. Going from scheme 1 to scheme 2, the substitution and income effects have opposite effects on period 2 consumption.
B.Marco can do better than consumption choice B by investing all of his grain and consuming the output in period 2.
C. Marco is less impatient at B than at A
D. Marco can do better than consumption choice B by investing all of his grain and borrowing against his period 2 output.
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