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Please explain how Is the 1+I greater than 1 obtained? step by step FIGURE 16.5 The Optimal lntertemporal Allocation As in the atemporal model, the

Please explain how Is the 1+I greater than 1 obtained? step by step

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FIGURE 16.5 The Optimal lntertemporal Allocation As in the atemporal model, the optimal interteniporal consumption bundle (bundle A) lies on the highest attainable indifference curve. Here, that occurs at a point of tangency. Note in Eignneij that the marginal rate of time preference at the optimal bundle (C1, C2) is positive, because the absolute value of the slope of the budget constraint is l + i > 1. In the example pictured in the diagram, the consumer has the same income in each time period, but consumes slightly more in period 2

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