, where c₁ is her consumption in period 1 and c2 is her consumption in period 2. Her income in period 1 is 3 times as large as her income in period 2. At what interest rate will she choose to consume the same amount in period 1 as in period 2?
, where c₁ is her consumption in period 1 and c2 is her consumption in period 2. Her income in period 1 is 3 times as large as her income in period 2. At what interest rate will she choose to consume the same amount in period 1 as in period 2?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
![Patience has a utility function
where c₁ is her consumption in period 1 and c2 is her consumption in period 2. Her
income in period 1 is 3 times as large as her income in period 2. At what interest rate
will she choose to consume the same amount in period 1 as in period 2?
20%
13%
25%
1/2
1/2
U(c1, c2) = ¹/² +0.80c¹/²
0%
80%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff3f78c5b-b74a-4589-af62-959378fde2ea%2F7b8398bf-c511-4b8d-b56c-707d557efabd%2F6z55f2q_processed.png&w=3840&q=75)
Transcribed Image Text:Patience has a utility function
where c₁ is her consumption in period 1 and c2 is her consumption in period 2. Her
income in period 1 is 3 times as large as her income in period 2. At what interest rate
will she choose to consume the same amount in period 1 as in period 2?
20%
13%
25%
1/2
1/2
U(c1, c2) = ¹/² +0.80c¹/²
0%
80%
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