Intertemporal choice.

Posted by Nikkita on May 13, 2016; 2:01am
URL: http://discussion-forum.276.s1.nabble.com/Intertemporal-choice-tp7600734.html

Please solve the following:

 Mr. O. B. Kandle  has a utility function c1c2 where
c1 is his consumption in period 1 and c2 is his consumption in period 2.
He will have no income in period 2. If he had an income of 30,000 in
period 1 and the interest rate increased from 10% to 12%,
(a) his savings would increase by 2% and his consumption in period 2
would also increase.
(b) his savings would not change, but his consumption in period 2 would
increase by 300.
(c) his consumption in both periods would increase.
(d) his consumption in both periods would decrease.
(e) his consumption in period 1 would decrease by 12% and his consump-
tion in period 2 would also decrease.