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Ella is deciding how much money to allocate to consumption today and tomorrow, (:1 and (:2 respectively. Ella's utility function is 11,031, 02) = 201
Ella is deciding how much money to allocate to consumption today and tomorrow, (:1 and (:2 respectively. Ella's utility function is 11,031, 02) = 201 + (:2. Assume that the price of stuff today is $1 per unit, and there is no inflation (71' = 0). What is the minimal interest rate i that would induce Ella to save some money for tomorrow instead of spending everything today? 20 percent (i = 0.2) 75 percent (i = 0.75) 50 percent (i = 0.5) 100 percent (i = 1)
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