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(2) C1 = Y1 S
(3) C2 = Y2 + (1+r) S
From (2) S = Y1 C1
C2 + C1(1+r) = Y2 + (1+r) Y1
Intercepts:
3
Future
Slope = -(1+r)
Y20
Y10 Today
PREFERENCES
C2
Utility level B
C1
5
C2
f
e
C1
C2
C1
7
C2 e1
e*
e2
C1