This paper concentrates on the primary theme of CONSIDER A CONSUMER WITH TRUE PREFERENCES RATHER THAN ACTING ON THE BASIS OF THESE PREFERENCES,… in which you have to explain and evaluate its intricate aspects in detail. In addition to this, this paper has been reviewed and purchased by most of the students hence; it has been rated 4.8 points on the scale of 5 points. Besides, the price of this paper starts from £ 40. For more details and full access to the paper, please refer to the site.
Consider a consumer with true preferences
Rather than acting on the basis of these preferences, the consumer is myopic and does not realize the true value of second-period consumption. The myopic preferences are given by U =
a. Determine how the level of saving depends on r.
b. How does the level of welfare measured by true preferences depend on r?
c. Assume that there is a population of H consumers who act according to these myopic preferences and that the equilibrium interest rate is rt+1 = a – bst, where st is the total level of savings in the economy. Can myopia ever increase the consumers’ true utilities?
d. Does this form of myopia provide a justification for social security?