Chapter Ten Intertemporal choice
Chapter Ten Intertemporal Choice
What are We doing in this chapter? We apply our basic framework of consumer choice to study issues of choices across different time periods, Again, in terms of theoretical framework. not much is new!
What Are We Doing in this Chapter? We apply our basic framework of consumer choice to study issues of choices across different time periods; Again, in terms of theoretical framework, not much is new!
What Are the questions? Persons often receive income in “umps”;eg. monthly salary How is a lump of income spread over the following month(saving now for consumption later)? Or how is consumption financed by borrowing now against income to be received at the end of the month?
What Are the Questions? Persons often receive income in “lumps”; e.g. monthly salary. How is a lump of income spread over the following month (saving now for consumption later)? Or how is consumption financed by borrowing now against income to be received at the end of the month?
Present and Future values Begin with some simple financial arithmetic Take just two periods; 1 and 2 Let r denote the interest rate per period
Present and Future Values Begin with some simple financial arithmetic. Take just two periods; 1 and 2. Let r denote the interest rate per period
Future value Given an interest rate r the future value one period from now of m is FV=m(1+r)
Future Value Given an interest rate r the future value one period from now of $m is FV = m(1+ r)