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Say a household has a wealth endowment of $5 and can use this to either consume (C) or save (S). Savings earn interest of 21%
Say a household has a wealth endowment of $5 and can use this to either consume (C) or save (S). Savings earn interest of 21% and consumption yields marginal benefit as follows: 1st $1 has MB $1.83, 2nd $1 has MB $1.47, 3rd $1 has MB 1.22, 4th $1 has MB 1.16, and 5th $1 has MB of $1.12. To maximize the sum of earnings on savings and benefit from consumption, the household should pick O C=2 Oc=3 TOO Oc-5
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