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Homework answers / question archive / Assume that the lifetime utility function is given by: A= Sºu (C (7)) epdt, (Q13
Assume that the lifetime utility function is given by: A= Sºu (C (7)) epdt, (Q13.26) 0 where U (.) is the felicity function and C (T) is consumption. The intertemporal substitution elasticity between C(t) and C(s) is formally defined as: U' (C(s))/U' (C (t)) d (C(s)/C(t)) 0 (C(t), C(s)) (Q13.27) C(s)/C(t) d [U' (C($))/U' (C(t))]* (a) Provide an interpretation for (Q13.27) involving the marginal rate of substitu- tion between C(s) and C(t). o
