Intertemporal budget constraint.Utility = min(C₁, C₂)

1-Budget line 1:Y₁= $800.Y₂= $1,300.The interest rate is 5 percent, both for borrowing and saving.

Draw the budget line, with solved numbers.Solve the optimal consumption levels to choose in time 1 and time 2.Draw the indifference curve.

2-Budget line 2:The interest rate for borrowing and saving has increased to 15 percent.Solve the new optimal consumption levels to choose.Draw the indifference curve.