Intertemporal Choice

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DEFINITION of 'Intertemporal Choice'

An economic term describing how an individual's current decisions affect what options become available in the future. Theoretically, by not consuming today, consumption levels could increases significantly in the future, and vice versa.

BREAKING DOWN 'Intertemporal Choice'

For individuals, these decisions relate more to saving and retirement, while for firms, various investment decisions involve intertemporal choice.

For example, an individual who saves today consumes less, causing his or her current utility to decline. Over time, the savings grow, increasing the amount of goods the individual can consume and, therefore, the person's future utility.

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