Holly's utility function is U(c1, c2) = c21 + 0.87/22, where cį is her consumption in peric and c2 is her consumption in period 2. In perioc her income is twice as large as her income in period 1. At what interest rate will she choose to me the sOunt in poried in

Microeconomic Theory
12th Edition
ISBN:9781337517942
Author:NICHOLSON
Publisher:NICHOLSON
Chapter17: Capital And Time
Section: Chapter Questions
Problem 17.3P
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Holly's utility function is U(c1, c2) = c/21 +
0.87d/22, where cq is her consumption in period 1
and c2 is her consumption in period 2. In period 2,
her income is twice as large as her income in
period 1. At what interest rate will she choose to
consume the same amount in period 2 as in
period 1? (Choose the closest answer.)
Group of answer choices
0.30
0.08
0.23
0.15
Transcribed Image Text:Holly's utility function is U(c1, c2) = c/21 + 0.87d/22, where cq is her consumption in period 1 and c2 is her consumption in period 2. In period 2, her income is twice as large as her income in period 1. At what interest rate will she choose to consume the same amount in period 2 as in period 1? (Choose the closest answer.) Group of answer choices 0.30 0.08 0.23 0.15
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