Edward would be equally happy with receiving $95 today or $100 one year from today. Edward's friend Bella would be just as happy receiving $90 today or $100 one year from today. Based on this information, which of the following best describes the difference between Edward and Bella?

Question

Edward would be equally happy with receiving $95 today or $100 one year from today.  Edward's friend Bella would be just as happy receiving $90 today or $100 one year from today. Based on this information, which of the following best describes the difference between Edward and Bella?

Quizplus · Accepted Answer

Bella is willing to accept a lower amount today ($90) instead of waiting a year for $100, indicating she places a higher value on money now than in the future. This is defined as having a higher rate of time preference. Edward, on the other hand, requires $95 to forgo $100 in a year, showing a lower rate of time preference compared to Bella.

Edward Would Be Equally Happy with Receiving $95 Today or $100