Question: A consumer problem. Consider a young consumer whose preferences over current and future consumption, c and c, are given by utility u = ln(c) +

A consumer problem. Consider a young consumer whose preferences over current and future consumption, c and c, are given by utility u = ln(c) + 12 ln(c). The goal of the person is to maximize utility subject to the budget constraint pc + pc 3. Let p = 1 and p = 0.5.

a) Suppose that the person plans to consume 1.5 units of consumption each period.

Explain why this would not be optimal for the consumer.

b) Find the optimal choice for this individual. (For this part, you can either provide your own derivation, or use the results of models seen in class.)

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