Sue is an exponential discounter. Her dis- count function which illustrates her preference for money at various points in time is characterized as follows:

(t) = 1/(1.07)t for t = 0,1,2, ...

Bob on the other hand is a hyperbolic dis- counter. His discount function is

: t = 1 for t = 0 = :8=1:03t1 for t = 1; 2; ...

a. What would Sue/Bob rather have: $1 today or $1.10 next year? Explain.

b. What would Sue/Bob rather have: $1 next year or $1.10 the year after that? Explain.