Assume that Maria does not have a preference for smooth consumption. In particular, the average of two consumption points on the same indifference curve yields the same utility to Maria (i.e., the average consumption point is on the same indifference curve as the other two points).

a) Draw Maria’s indifference curves.

b) What is the implication of Maria’s preferences for the marginal rate of substitution?

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The Intertemporal Choice Model in Practice: Income and Wealth