Question 29 Olivia has well-behaved preferences over consumption in two periods, c1 and c2. She is a saver, and regards
Posted: Sun Jul 03, 2022 6:50 am
Question 29Olivia has well-behaved preferences over consumption in twoperiods, c1and c2. She is a saver, and regards both c1 and c2 as normal goods.Ifthere is a fall in the interest rate then:A. Both the substitution and income effects increase her demand forc1.B.The substitution effect increases her demand for c while theincome effectdecreases it.C. The substitution effect decreases her demand for c while theincome effectincreases it.D. Both the substitution and income effects decrease her demand forc1.