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Suppose that there are only 10 individuals in the economy each with the following utility function over present and future consumption: U(ci , c2 )

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Suppose that there are only 10 individuals in the economy each with the following utility function over present and future consumption: U(ci , c2 ) = c1 + = c2, where c1 is consumption today, and c2 is consumption tomorrow. Consumption tomorrow is less valued because people are impatient and prefer consuming now rather than later. Buying 1 unit of consumption today costs $1 today and buying 1 unit of consumption tomorrow costs $1 tomorrow. All individuals have income of $10 dollars today and no income tomorrow (because they will be retired) but they can save at the market interest rate " > 0. What is the price today of one unit of consumption tomorrow? To verify that you have the correct answer, calculate the price today of one unit of consumption tomorrow if r = 0.05. D = 0.95

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