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Angela cares only about food this year and food next year. Let's use 0 to stand for food this year and 1 to stand for
Angela cares only about food this year and food next year. Let's use 0 to stand for food this year and 1 to stand for food next year (both in kilograms). Her preferences correspond to the utility function (0,1)=01. For that utility function, the marginal utility of food this year is 0=1, and the marginal utility of food next year is 1=0. Suppose she earns $70 this year and $30 next year. Food costs $1 per kg in both years and the interest rate is 10 percent. How much does she consume this year and how much does she save?
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