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Zero Intrinsic Impatience
An individual is defined as having zero intrinsic impatience if, when given the chance to transfer consumption across time on a one-to-one basis (such as storing cash without interest), they opt for perfect consumption smoothing. For example, a person with a $100 endowment and no future income would store exactly half ($50) to ensure their consumption levels are identical in both the present and future periods.
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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
The Economy 2.0 Macroeconomics @ CORE Econ
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Quantifying Julia's Intrinsic Impatience via Point B'
Consumption Behavior with No Intrinsic Impatience
Causes of Intrinsic Impatience: Myopia and Prudence
Explaining Disparate Outcomes: The Impact of Situational Differences on Identical Preferences
An individual has a financial plan that provides them with $1,000 of consumption this year and $1,000 of consumption next year. They are then offered an alternative: they can give up $100 of consumption this year in exchange for an additional $110 of consumption next year. The individual states that they are indifferent between their original plan and this new alternative. Based on this information, what can be concluded about their time preference?
Identifying Intrinsic Impatience in Financial Decisions
An individual who has an equal amount of consumption planned for the present and the future demonstrates intrinsic impatience if they are willing to give up $50 of present consumption in exchange for exactly $50 of future consumption.
An individual who has an equal amount of consumption planned for the present and the future demonstrates intrinsic impatience if they are willing to give up $50 of present consumption in exchange for exactly $50 of future consumption.
Comparing Degrees of Intrinsic Impatience
Differentiating Reasons for Time Preference
Match each scenario describing an individual's consumption choice to the type of time preference it best represents.
An economist observes an individual who has arranged their finances to have exactly the same amount of spending money available this year and next year. Which of the following scenarios would most clearly demonstrate that this individual has an inherent preference for consuming now rather than later?
Analyzing Consumption Preferences
Explaining the Manifestation of Intrinsic Impatience
Zero Intrinsic Impatience
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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.
Consumption Smoothing with Future Income
Consumption Smoothing with Uneven Income