In an isolated peasant village, the only crop is corn. Good harvests alternate with bad harvests. This year the harvest will be 1,000 bushels. Next year it will be 150 bushels. There is no trade with the outside world. Corn can be stored, but rats will eat 40% of what is stored in a year. The villagers have the Cobb-Douglas utility functionU(c₁,c₂) =c₁c₂, wherec₁is consumption this year andc₂is consumption next year.

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