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Reference.org
Elasticity of intertemporal substitution
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<p>In <a href="/facts/Economics/HYctA2Dn">economics</a>, elasticity of intertemporal substitution (or intertemporal elasticity of substitution, EIS, IES) is a measure of responsiveness of the <a href="/facts/Economic_growth/kEXm3jWm">growth rate</a> of <a href="/facts/Consumption_(economics)/k3eeT8bw">consumption</a> to the <a href="/facts/Real_interest_rate/3o5bD7CR">real interest rate</a>. If the real interest rate rises, current consumption may decrease due to increased return on savings; but current consumption may also increase as the household decides to consume more immediately, as it is feeling richer. The net effect on current consumption is the elasticity of intertemporal substitution. </p>