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Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder
Edition 12ISBN: 978-1133189022Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder
Edition 12ISBN: 978-1133189022 Exercise 42
Flexible Felix views present and future consumption as perfect substitutes. He does, however, discount future consumption by a bit to reflect the uncertainties of his life. His utility function is therefore given by
U(C0, C1)=C0 + C1/(1+?)where d (which is a small positive number) is the ''discount rate'' he applies to C 1.
a. Graph Felix's indifference curve map.
b. Show that if r (the real interest rate) exceeds d, then C 0 = 0.
c. Show that if r 1= 0.
d. What do you conclude about the relationship between a person's saving behavior and his or her ''impatience''?
U(C0, C1)=C0 + C1/(1+?)where d (which is a small positive number) is the ''discount rate'' he applies to C 1.
a. Graph Felix's indifference curve map.
b. Show that if r (the real interest rate) exceeds d, then C 0 = 0.
c. Show that if r 1= 0.
d. What do you conclude about the relationship between a person's saving behavior and his or her ''impatience''?
Explanation
Verified
Verified
Flexible Felix's utility function is: 
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Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder
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