Patience Has a Utility Function U(c₁, C₂) , Where

question 1

Multiple Choice

Patience has a utility function U(c₁, c₂) , where c₁ is her consumption in period 1 and c₂ is her consumption in period 2. Her income in period 1 is 5 times as large as her income in period 2. At what interest rate will she choose to consume the same amount in period 1 as in period 2?

• A) 0.10
• B) 0
• C) 1
• D) 0.20
• E) 0.30

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Definitions:

Motivation Offer

An incentive or set of incentives provided to improve an individual's or group's willingness and energy to achieve a task or reach a goal.

Individual Preferences

are personal likes, dislikes, desires, or needs that influence choices and behavior.

Equity Theory

A theory of motivation that explains how employees perceive fairness in workplace reward distribution, comparing their input-outcome ratios to those of others.

Perceived Inequity

Perceived inequity occurs when an individual believes that the ratio of their inputs to outcomes is not equal to the input-outcome ratios of others, leading to feelings of dissatisfaction and unfair treatment.