Charlie cares only about the amount of chocolate he eats this year and the amount of chocolate
Question:
For that utility function, the marginal utility of chocolate this year isMU0 = 1/√C0,
and the marginal utility of chocolate next year isMU1 = 1/√C1,
Suppose he earns $1,000 this year and nothing next year. Chocolate costs $2 per ounce this year, but will cost $4 per ounce next year. The interest rate (expressed as a decimal) is R.
Find a formula showing how much Charlie will save as a function of the interest rate. When the interest rate rises, does Charlie save more or less?
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Question Posted: