Essay
Doug's present and future consumption are perfect substitutes. He does however discount future consumption by a bit. His utility function is
U(C0,C1)= C0 + C1/(1 + a)where a is the discount rate he applies to C1.
i)What is the shape of Doug's indifference curves?
ii)Show that if i exceeds a then C0 = 0.
iii)Show that if i<a then C1 = 0.
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i)the indifferent curves are straight li...View Answer
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