Question 3:

a. Discuss the assumptions of the Fisher's Intertemporal Choice Model

b. Using Fisher's Intertemporal Choice model, consider the following scenario:

i. Suppose Milo earns $1,750 in the first period and $2,500 in the second period. If he consumes $1,200 in the first period and $1,550 in the second period, what is the interest rate?

ii. Now if Milo's consumption changes to $1,800 in the first period and $2,000 in the second period, what is the new interest rate?

c. Graphically depict and explain the Consumer's optimum in the Fisher's Intertemporal Choice Model.