Patience Has the Utility Function Where C₁ Is Her

question 23

Essay

Patience has the utility function where c₁ is her consumption in period 1 and c₁ is her consumption in period 2. She will earn 100 units of the consumption good in period 1 and 100 units of the consumption good in period 2. She can borrow or lend at an interest rate of 10%.
a. Write an equation that describes Patience's budget.
b. If Patience neither borrows nor lends, what will be her marginal rate of substitution between current and future consumption?
c. If Patience does the optimal amount of borrowing or saving, what will be the ratio of her period 2 consumption to her period 1 consumption?

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Definitions:

Earnings Per Share

Earnings Per Share (EPS) calculates the portion of a company's profit allocated to each outstanding share of common stock, serving as an indicator of the company's profitability.

Net Income

The total profit of a company after all expenses and taxes have been deducted from revenues, also known as the bottom line or net profit.

Shares Outstanding

The total number of a company's shares currently owned by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company’s insiders.

Statement Of Comprehensive Income

The statement of comprehensive income is a financial statement that includes all changes in equity during a period except those resulting from investments by and distributions to owners.