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:

Elliot Jacques

A British psychoanalyst and management consultant known for his theories on corporate hierarchy and organizational structure.

Time Horizons

The intended duration over which an individual, project, or investment is expected to be evaluated or engaged.

Organize

The act of arranging or structuring resources, information, or activities in a systematic way for efficient management or implementation.

Time Frame

A specific period during which certain events occur or are expected to occur.