34 



MULTIPLE PURPOSE RIVER DEVELOPMENT 



Current consumption 



FIGURE 7. The Consumer's Preferred Combination of Current 

 Consumption and Increase in Future Annual Income 



low, but his future income and wealth will be much greater. A 

 higher indifference curve, such as I3, represents a higher state of 

 satisfaction, and is preferred. If OY is his present income, through 

 different amounts of saving, he can attain any of the points on the 

 line XY, where each point represents some combination of con- 

 sumption in the present plus the annual addition to future income 

 of the specified interest payments. The consumer will attain his 

 preferred position at the point of tangency c, where his willingness 

 to substitute future interest income for present consumption is 

 exactly equal to the interest rate. Should he select some other 

 point, such as a, he would be sacrificing needlessly some of the 

 possible satisfaction which his level of income permits. 



