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Suppose a consumer's utility function is U(FO, F1) = 500.55,0.5, where Fo represents food consumed this year and Firepresents food consumed next year. For that
Suppose a consumer's utility function is U(FO, F1) = 500.55,0.5, where Fo represents food consumed this year and Firepresents food consumed next year. For that utility function, the marginal utility of food consumed this year is 0.5 (F1/F)0.5 and the marginal utility of food consumed next year is 0.5 x (FO/F7)0.5 Suppose the consumer earns $100 this year and nothing in the next, food costs $1 per unit in both years, and the interest rate is 10%. How much does she spend this year, and how much does she save? She spends $50 this year and saves $50. She spends $95 this year and saves $5. She spends $45 this year and saves $55. She spends $55 this year and saves $45
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