Patience Has a Utility Function U(c₁, C₂)= C^1/2₁

question 22

Multiple Choice

Patience has a utility function U(c₁, c₂) = c^1/2₁ + .083c^1/2₂, where c₁ is her consumption in period 1 and c₂ is her consumption in period 2.Her income in period 1 is 3 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)0.20
• B)0
• C)0.10
• D)0.60
• E)0.30

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Definitions:

Total Variation

Total variation quantifies the extent to which a function varies across its domain, often used in mathematical analysis and signal processing.

Dependent Variable

In an experiment, this is the variable anticipated to vary as a result of alterations made to the independent variable.

Explained Variation

The portion of the total variation in a dataset that is accounted for by the model's predictors.

Unexplained Variation

The part of the total variation in a data set that cannot be attributed to the variables considered in a study.