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3 August, 08:11

Clifford lives by the motto "Eat, drink, and be merry today, for tomorrow doesn't matter." If today's consumption is represented by "x" and tomorrow's consumption is represented by "y," then which of the following best represents Clifford's utility function? A) U=x-y

B) U=x/y

C) U=x

D) U=y

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Answers (1)
  1. 3 August, 11:30
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    C) U = x

    Explanation:

    Since Clifford's motto focuses on present joy and consumption, we can assume that his marginal propensity to consume is 1 and his marginal propensity to save is 0 (even if saving only for 1 day). Clifford will spend all his money in today's consumption, therefore, his utility function U = x, since there is no tomorrow. Ans the cycle repeats itself day after day.
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