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Gregory Redmond
on Oct 14, 2024

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A utility-maximizing consumer would not choose the investment that maximizes the present value of her income stream unless she planned to spend her entire wealth in the first period.

Utility-Maximizing

The process or behavior of selecting the combination of goods and services that provide the highest utility or satisfaction to an individual, given their budget constraint.

Present Value

The worth at present of a future money amount or sequences of cash flows, applying a specified rate of return.

Investment

The action of allocating resources, usually money, with the expectation of generating an income or profit.

  • Understand how utility functions reflect consumer preferences for current versus future consumption.
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Tashara SimmonsOct 20, 2024
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