Comparing Patience: Steeper vs. Shallower Indifference Curves

Two individuals, Sam and Pat, currently possess an identical combination of resources available for consumption this year and consumption next year. On a graph with 'Consumption This Year' on the horizontal axis and 'Consumption Next Year' on the vertical axis, we can draw a curve for each person representing all combinations of present and future consumption that would leave them equally satisfied. At their current, shared combination of resources, Sam's curve is significantly steeper than Pat's curve. Based on this information, what can be inferred about their preferences?

Intertemporal Choice and Preferences

Consider two individuals, Alex and Ben, who have the same combination of present and future consumption. On a standard intertemporal choice graph (Present Consumption on the x-axis, Future Consumption on the y-axis), Alex's indifference curve is flatter than Ben's at their current consumption point. This implies that Alex would require a larger amount of future consumption than Ben to be compensated for giving up one unit of present consumption.

Explaining Time Preference with Indifference Curves

On a graph where the horizontal axis represents 'Consumption Today' and the vertical axis represents 'Consumption Next Year', the slope of an individual's indifference curve at any point reveals their time preference. Match each description of time preference with its corresponding graphical or conceptual characteristic.

Evaluating Preferences in Intertemporal Choice

On a graph plotting consumption today against consumption tomorrow, if Individual A's indifference curve is steeper than Individual B's at the same point, it indicates that Individual A is more ________ than Individual B.

Client Investment Preferences

Four individuals are each offered a choice. They can either keep $100 today or trade it for a larger amount of money to be received in one year. The list below shows the minimum amount each person would need to receive in one year to be willing to give up their $100 today. Based on this information, arrange the individuals in order from MOST patient to LEAST patient.

Investment Decisions and Time Preference