Consider a consumer who has preferences over consumption today, x1, and consumptiontomorrow, x2. the consumer has an endowment igiven by (m1, m2), they receivem1inincome today andm2in income tomorrow. they can borrow money today at interest rater: they must pay back (1 +r) times the amount tomorrow. they can also save money todaythat will give them (1 +r) times the amount tomorrow. assume thatr > 0.suppose the consumer’s preferences are represented byu(x1, x2) = 2 ln(x1) + ln(x2). withthis utility function, they "care more" about consumption today. if the consumer initiallyhas an endowment given by (15,15), does changing the endowment to (12,18) make thembetter off, worse off, or can you tell? explain your answer.
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