Microeconomics 2nd Edition by Douglas Bernheim

Exercise 2

Charlie cares only about the amount of chocolate he eats this year and the amount of chocolate he eats next year. We will use C 0 to stand for chocolate this year and C 1 to stand for chocolate next year. His preferences correspond to the utility function
Suppose he earns $1,000 this year and nothing next year. Chocolate costs $2 per ounce this year, but will cost $4 per ounce next year. The interest rate (expressed as a decimal) is R. Find a formula showing how much Charlie will save as a function of the interest rate. When the interest rate rises, does Charlie save more or less