Figure 9.4b: A Visual Comparison of Intrinsic Impatience

Anya and Ben both start with a plan to consume $100 worth of goods today and $100 tomorrow. They are then presented with an alternative plan where they consume only $80 today. To feel equally satisfied as their original plan, Anya would need to consume $125 tomorrow, while Ben would need to consume $130 tomorrow. Based on this information, which of the following statements is correct?

Evaluating Consumption Choices

Interpreting Intertemporal Choice

Consider an individual who is currently planning to consume the same amount of goods today and tomorrow. If this individual displays intrinsic impatience, they would be willing to give up $10 of consumption today in exchange for exactly $10 of additional consumption tomorrow.

An individual's consumption plan is currently 'smoothed' so that they consume the same amount of goods today as they will tomorrow. This individual values a good received today more than the same good received tomorrow. If their consumption today is reduced by $15, which of the following changes in tomorrow's consumption would leave them feeling equally satisfied as their original plan?

An individual states they are equally happy with any of the following three consumption plans:

• Plan X: Consume $100 worth of goods today and $100 worth of goods tomorrow.
• Plan Y: Consume $90 worth of goods today and $115 worth of goods tomorrow.
• Plan Z: Consume $110 worth of goods today and $88 worth of goods tomorrow.

Based on a comparison of these plans, what can be concluded about this individual's preferences?

Comparing Client Preferences for Consumption

An individual's consumption plan is currently 'smoothed' so that they consume the same amount of goods today as they will tomorrow, represented by a point on their indifference curve. If their consumption today is reduced by $20, which of the following changes in tomorrow's consumption, if it keeps them on the same indifference curve, would demonstrate that they value current consumption more than future consumption?

Explaining Intrinsic Impatience via an Indifference Curve

An individual's preferences for consumption now versus consumption later can be represented by an indifference curve. Consider a point on this curve where consumption is perfectly smooth (i.e., the same amount is consumed in both periods). If this individual values current consumption more than future consumption, what must be true about the indifference curve at this specific point?

Consider an individual who is currently planning to consume the same amount of goods today and tomorrow. If this individual displays intrinsic impatience, they would be willing to give up $10 of consumption today in exchange for exactly $10 of additional consumption tomorrow.