Example 1: Allocating resources across time Consider an individual who live for two dates now(t=0)and later(t=1); She is endowed with 100 new and 25 later Her happiness(utility depends on her consumption now and later: Co and Cl She prefer a smooth consumption path over time There is a borrowing/lending market with zero Interest rateExample 1: Allocating resources across time • Consider an individual who live for two dates: now (t=0) and later (t=1); • She is endowed with 100 new and 25 later; • Her happiness (utility) depends on her consumption now and later: C 0 and C 1 ; • She prefer a smooth consumption path over time; • There is a borrowing/lending market with zero interest rate;