Revealing Preferences through Action
Consider two individuals, Alex and Ben, who both live for two periods (today and the future). They can save money from today to the future with no interest earned. Analyze their situations and answer the questions that follow.
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CORE Econ
Economics
Social Science
Empirical Science
Science
Economy
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
Analysis in Bloom's Taxonomy
Cognitive Psychology
Psychology
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An individual receives a one-time, unexpected bonus of $2,000. They have no other income in the current period or the next. They can save any portion of this bonus for the next period, but the savings will not earn any interest. If this individual has zero intrinsic impatience, how will they allocate their consumption between the two periods?
Analyzing Consumption Choices
Interpreting Consumption Behavior
An individual receives a one-time payment of $500 and expects no future income. They can save any amount of this payment for the next period without earning interest. If they choose to consume $300 in the current period and save $200 for the future, their behavior is consistent with having zero intrinsic impatience.
Comparing Consumption Choices and Impatience
Revealing Preferences through Action
An individual receives a one-time endowment of $100 and expects no future income. They can save any portion of this money for the next period, but the savings will not earn any interest. Match each potential consumption choice with the type of time preference it reveals.
Analyzing Economic Inefficiency
Consumption Smoothing with Future Income
Consumption Smoothing with Uneven Income