Harvey Habit Has a Utility Function U(c1, C2) = Min{c₁

question 56

Multiple Choice

Harvey Habit has a utility function U(c1, c2) = min{c₁, c₂}. If he had an income of $880 in period 1 and $1,320 in period 2 and if the interest rate were 0.20, how much would Harvey choose to spend on bread in period 1?

• A) $1,620
• B) $360
• C) $540
• D) $2,160
• E) $1,080

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Definitions:

Material and Likely

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