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Solve clearly 3) Kim has the following intertemporal utility function for the consumption of iPad games: U. = Ut + B(but+1 + 621:42 + 63Ut+3

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Solve clearly

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3) Kim has the following intertemporal utility function for the consumption of iPad games: U. = Ut + B(but+1 + 621:42 + 63Ut+3 + .") where B, 6 6 [0,1] Suppose Kim has the following options and the associated utility streams from playing an hour of iPad games: Prodigy Codespark Roblox Ut=0 2 4 10 12 8 0 uteo is the utility gained from playing an hour of games on the day the game is played, i.e. immediate benefit. Utz1 is the utility gained from playing an hour of games on the day after the game is played, i.e. delayed benefit. a. Assume B = 1 and & = 1, and Kim is allowed to play iPad games for an hour today. Which of the three games above will Kim choose to play? (1 mark) b. Assume B = 1 and 6 = 1. Kim's father tells her: "You can play for an hour today or for two hours tomorrow." What would Kim choose? (1 mark) c. Suppose 6 = 1. At what value of B would Kim be indifferent between playing for an hour today and playing for two hours tomorrow? (2 marks) d. Suppose Kim gets the following offer (assume B = 1/2 and 6 = 1): "You can play for an hour tomorrow or for two hours the day after tomorrow." i. What would Kim choose? (1 mark) ii. Would Kim's choice change if she were asked to reconsider her choice tomorrow? (1 mark)

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