In the two-period utility maximization model the opportunity cost of one unit of C₁ is

Name: In the two-period utility maximization model the opportunity cost of one unit of C 1 is
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In the two-period utility maximization model, the opportunity cost of one unit of consumption in period 1 is the amount of consumption that must be given up in period 0 to obtain it. Since consumption in period 0 earns interest at rate r, the opportunity cost of one unit of C₁ is 1/(1+r) units of C₀.

In the Two-Period Utility Maximization Model the Opportunity Cost of One