Problem
Consider two economies, labeled A and B. In each one, let every two-period-lived person be endowed with 20 units of the consumption when young and nothing when old. In Economy A, each young person chooses to consume 10 units of the consumption good. In Economy B, each young person chooses to consume 8 units of the consumption good. In each economy, the young person's choice is the one that maximizes lifetime welfare.
1. What, if anything, can you infer about the welfare level of the current and future generations from this information? Specifically, is one on an indifference curve representing greater welfare than the other?
2. What, if anything can you infer about the welfare of the initial old from the description given for Economies A and B?