文档介绍：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 the Questions?
Persons often receive e in “lumps”; . monthly salary.
How is a lump of e spread over the following month (saving now for consumption later)?
Or how is consumption financed by borrowing now against e 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.
Future Value
Given an interest rate r the future value one period from now of $m is
Present Value
Q: How much money would have to be saved now, in the present, to obtain $1 at the start of the next period?
A: $m saved now es $m(1+r) at the start of next period, so we want the value of m for which m(1+r) = 1 That is, m = 1/(1+r), the present-value of $1 obtained at the start of next period.
Present Value
The present value of $1 available at the start of the next period is
And the present value of $m available at the start of the next period is
The Intertemporal Choice Problem
Let m1 and m2 be es received in periods 1 and 2.
Let c1 and c2 be consumptions in periods 1 and 2.
Let p1 and p2 be the prices of consumption in periods 1 and 2.
The Intertemporal Choice Problem
The intertemporal choice problem: Given es m1 and m2, and given consumption prices p1 and p2, what is the most preferred intertemporal consumption bundle (c1, c2)?
For an answer we need to know:
the intertemporal budget constraint
intertemporal consumption preferences.
The Intertemporal Budget Constraint
To start, let’s ignore price effects by supposing that p1 = p2 = $1.