Consumers with time-inconsistent preferences:
A) base consumption decisions on transitory rather than permanent income.
B) seek to consume more in retirement than during their working years.
C) may alter decisions simply because time passes.
D) face borrowing constraints that prevent rational behavior.

Question

Quizplus · Accepted Answer

Consumers with time-inconsistent preferences may alter their consumption decisions simply because time passes. They may initially plan to save more and consume less, but as time passes, they may give in to the temptation of spending more and saving less, leading to inconsistency in their behavior over time.

Consumers with Time-Inconsistent Preferences