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Optimal Intertemporal Choice as Tangency Point
In a constrained choice model like intertemporal choice, the optimal decision is found at the point of tangency between the highest possible indifference curve and the feasible frontier. [1, 2] This tangency point represents the combination of present and future consumption that provides the greatest utility given the individual's budget constraints. The slope of the feasible frontier, which is determined by the interest rate, is equal to the slope of the indifference curve at this optimal point. [1, 2]
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CORE Econ
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Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.9 Lenders and borrowers and differences in wealth - The Economy 2.0 Microeconomics @ CORE Econ
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