(Solution) - Flexible Felix views present and future consumption as perfect s -(2025 Original AI-Free Solution)

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Flexible Felix views present and future consumption as perfect substitutes. He does, however, discount future consumption by a bit to reflect the uncertainties of his life. His utility function is therefore given by
U (C0, C1) = C0 + C1 / (1 + ?)
Where ? (which is a small positive number) is the ''discount rate'' he applies to C1.
a. Graph Felix's indifference curve map.
b. Show that if r (the real interest rate) exceeds d, then C0 = 0.
c. Show that if r < ?, then C1 = 0.
d. What do you conclude about the relationship between a person's saving behavior and his or her ''impatience''?