We will derive this in a second more formally- but if we believe that assets span-ie there are enough assets so that you can actually by and sell goods in each state of the world then consumers maxImize ∑p(e)+(-∑kc Where ks indicates the cost of consumption in state s, which leads to first order conditions: Tsu(cs)=nps or u(c h-p k The ratio of the marginal utility of consumption in the different states equals the ratio of the prices divided by the ratioWe will derive this in a second more formally– but if we believe that assets span– i.e. there are enough assets so that you can actually by and sell goods in each state of the world, then consumers maximize:  s1 S psucs   w   s1 S kscs where ks indicates the cost of consumption in state s, which leads to first order conditions: su cs  ps or u cz u cs  kzps kspz The ratio of the marginal utility of consumption in the different states equals the ratio of the prices divided by the ratio