Discount rate/Tutorials: Difference between revisions
Jump to navigation
Jump to search
imported>Nick Gardner No edit summary |
imported>Nick Gardner No edit summary |
||
| Line 9: | Line 9: | ||
where: | where: | ||
:δ is the pure time | :δ is the pure time preference rate (the utiloty discount rate; | ||
:η is the elasticity of marginal utility with respect to consumption; and, | :η is the elasticity of marginal utility with respect to consumption; and, | ||
:g is the expected future growth rate of consumption. | :g is the expected future growth rate of consumption. | ||
Revision as of 07:04, 24 August 2008
The Ramsey equation
The social time preference rate, s, is given by:-
- s = δ + ηg
where:
- δ is the pure time preference rate (the utiloty discount rate;
- η is the elasticity of marginal utility with respect to consumption; and,
- g is the expected future growth rate of consumption.