Harvey Habit has a utility function U(c 1 , c 2 )  min  c 1 , c 2  .If he had an income of $1,230 in period 1 and $615 in period 2 and if the interest rate were 0.05, how much would Harvey choose to spend on bread in period 1?A) $1,860B) $465C) $1,395D) $310E) $930

Question

Harvey Habit has a utility function U(c 1 , c 2 )    min  c 1 , c 2  .If he had an income of $1,230 in period 1 and $615 in period 2 and if the interest rate were 0.05, how much would Harvey choose to spend on bread in period 1?A) $1,860B) $465C) $1,395D) $310E) $930

Eduardo Orozco · Accepted Answer

Final Answer : E, Explanation :  Harvey's utility function suggests he aims to equalize consumption across two periods. With an income of $1,230 in period 1 and $615 in period 2, and an interest rate of 0.05, he would save or borrow to ensure equal consumption in both periods. The total income over two periods is $1,230 + $615/(1+0.05) = $1,845. Dividing this equally between two periods gives $922.50 per period, which rounds to $930 for period 1 spending.

Harvey Habit has a utility function U(c₁, c₂)  minc₁, c₂.If he had an income of $1,230 in period 1 and $615 in period 2 and if the interest rate were 0.05, how much would Harvey choose to spend on bread in period 1?

A) $1,860
B) $465
C) $1,395
D) $310
E) $930

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Learning Objectives

Learning Objectives

Related questions

Harvey Habit has a utility function U(c1, c2)  minc1, c2.If he had an income of $1,230 in period 1 and $615 in period 2 and if the interest rate were 0.05, how much would Harvey choose to spend on bread in period 1?A) $1,860B) $465C) $1,395D) $310E) $930

Definitions

Learning Objectives

Learning Objectives

Related questions

Harvey Habit has a utility function U(c₁, c₂)  minc₁, c₂.If he had an income of $1,230 in period 1 and $615 in period 2 and if the interest rate were 0.05, how much would Harvey choose to spend on bread in period 1?

A) $1,860
B) $465
C) $1,395
D) $310
E) $930