Assume Peter's preferences over time (periods are yearly) are given by U(c1, C2, C3, C4, · ...) = ln(c1) + Bln(c2) + B²ln(c3)+... Assume that Peter can borrow or lend at the same rate r=10% and 1 B = 1.15 Then, we know the following about how Peters consumption changes over time: Peters consumption declines the older he gets. Peters consumption increases the older he gets Peters consumption is constant over his life-time We can't tell anything about his consumption level because we have not been given any information about his income over his life-time.
Assume Peter's preferences over time (periods are yearly) are given by U(c1, C2, C3, C4, · ...) = ln(c1) + Bln(c2) + B²ln(c3)+... Assume that Peter can borrow or lend at the same rate r=10% and 1 B = 1.15 Then, we know the following about how Peters consumption changes over time: Peters consumption declines the older he gets. Peters consumption increases the older he gets Peters consumption is constant over his life-time We can't tell anything about his consumption level because we have not been given any information about his income over his life-time.
Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter13: Capital, Interest, Entrepreneurship, And Corporate Finance
Section: Chapter Questions
Problem 1QFR
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