Discount rate/Tutorials: Difference between revisions
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==The Ramsey equation== | |||
The social time preference rate, s, is given by:- | |||
:::s = δ + ηg | |||
where: | |||
:δ is the pure time prefernce 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. | |||
Revision as of 07:02, 24 August 2008
The Ramsey equation
The social time preference rate, s, is given by:-
- s = δ + ηg
where:
- δ is the pure time prefernce 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.