W hen you walk into a store, you are confronted with thousands of goods that
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- Consumption when Young 0 55,000 $110,000 $50,000 Consumption when Old
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15 The Consumption–Saving Decision this figure shows the budget constraint for a person deciding how much to consume in the two periods of his life, the indifference curves representing his preferences, and the optimum. Consumption when Young 0 55,000 $110,000 $50,000 Consumption when Old 100,000 Optimum I 3 I 2 I 1 Budget constraint 65875_ch21_ptg01_433-460.indd 454 15/10/13 11:53 AM Copyright 201 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. CHAPTER 21 the theOrY OF CONSUMer ChOICe 455 consumes nothing when young and $110,000 when old. The budget constraint shows these and all the intermediate possibilities. Figure 15 uses indifference curves to represent Saul’s preferences for consump- tion in the two periods. Because Saul prefers more consumption in both periods, he prefers points on higher indifference curves to points on lower ones. Given his preferences, Saul chooses the optimal combination of consumption in both periods of life, which is the point on the budget constraint that is on the highest possible indifference curve. At this optimum, Saul consumes $50,000 when young and $55,000 when old. Now consider what happens when the interest rate increases from 10 percent to 20 percent. Figure 16 shows two possible outcomes. In both cases, the budget constraint shifts outward and becomes steeper. At the new, higher interest rate, Saul gets more consumption when old for every dollar of consumption that he gives up when young. The two panels show the results given different preferences by Saul. In both cases, consumption when old rises. Yet the response of consumption when young to the change in the interest rate is different in the two cases. In panel (a), Saul responds to the higher interest rate by consuming less when young. In panel (b), Saul responds by consuming more when young. Saul’s saving is his income when young minus the amount he consumes when young. In panel (a), an increase in the interest rate reduces consumption when young, so saving must rise. In panel (b), an increase in the interest rate induces Saul to consume more when young, so saving must fall. tải về 1.28 Mb. Chia sẻ với bạn bè của bạn:
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