Question

Lee saves most of his money from his paycheck; he forgoes restaurant meals, new clothes, and a new car, and he lives in a small one-bedroom apartment. He understands that his utility is low now. However, his ______________ will give him _____ utility in the future.(A) intertemporal decision making; higher(B) intertemporal decision making; lower(C) planning; lower (D) time-preference decision making; higher

Answer 1

Answer: Option A

Explanation: In simple words, intertemporal decision making refers to the study of how the decision made by an individual today affects the choices that he or she have in the future. It is based on the assumption that less consumption today will bring significant increase in consumption tomorrow.

In the given case, despite of having enough income to lead a healthy lifestyle in present,Lee decided to save his money in the future. This will lead to choices fro him that will give him higher utility.

Hence from the above we can conclude that the correct option is A.