Refer to the following figure when answering
Figure 16.2: Consumption Function
-According to the consumption function in Figure 16.2:
A) people's lifetime utilities are equal to $u \left( c _ { 1 } \right) + u \left( c _ { 2 } \right)$
B) people prefer to consume the average over their lifetimes rather than $c _ { 1 }$ and $c _ { 2 }$
C) the utility associated with consuming the average over both periods is less than the average of $$u \left( c _ { 1 } \right)$$ and $u \left( c _ { 2 } \right)$
D) $u ( \bar { c } )

Question

Refer to the following figure when answering  
Figure 16.2: Consumption Function 
-According to the consumption function in Figure 16.2:
A) people's lifetime utilities are equal to $u \left( c _ { 1 } \right) + u \left( c _ { 2 } \right)$ 
B) people prefer to consume the average over their lifetimes rather than $c _ { 1 }$ and $c _ { 2 }$ 
C) the utility associated with consuming the average over both periods is less than the average of $$u \left( c _ { 1 } \right)$$ and $u \left( c _ { 2 } \right)$ 
D) $u ( \bar { c } ) < u \left( c _ { 1 } \right)$ 
E) the marginal propensity to consume is greater than one

Quizplus · Accepted Answer

The consumption function suggests that people prefer to smooth consumption over their lifetime, consuming an average amount rather than varying significantly between periods.

Refer to the Following Figure When Answering Figure u(c1)+u(c2)u \left( c _ { 1 } \right) + u \left( c _ { 2 } \right)u(c1​)+u(c2​)

Refer to the Following Figure When Answering
Figure $u \left( c _ { 1 } \right) + u \left( c _ { 2 } \right)$