TAsection04

TAsection04 - d t = l s t for t = 1 2 and k 2 = a 2 we assume k 1 = 0 The&rm pays rental rate r for capital that is&nanced by

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
TA section 05 February 27, 2009 Imagine an economy where the representative agent preferences are log c 1 + log (1 l 1 ) + ± [log c 2 + log (1 l 2 )] and he or she chooses to decide how much to consume and work in period 1 and 2. The representative agent has a source of income by supplying labor with w 1 and w 2 for period 1 and 2 respectively. In addition, the representative agent chooses to save, a 2 , which has net return of r . Assume there is no initial asset, i.e. a 1 = 0 , and labor supply is normalized so that it cannot exceed 1 of representative agents and capital demand is also met by saving decision of representative agents, that is l
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: d t = l s t for t = 1 ; 2 and k 2 = a 2 ( we assume k 1 = 0) . The &rm pays rental rate, r , for capital that is &nanced by representative saving asset in period 2 and also w 1 and w 2 for labor wage. The production function of the representative &rm is y = l 1 for period 1 and y 2 = k & 2 l 1 & & 2 with ² < 1 . Problem 1 Formulate the problem of the household. Problem 2 Solve the problem of the household. Problem 3 Formulate and solve the problem of the &rm. Problem 4 Does the &rm have pro&ts in both periods? Proof and explain. Problem 5 Find an equilibrium for this economy: Problem 6 Formulate the social planners problem: Problem 7 Solve the social planners problem: 1...
View Full Document

This note was uploaded on 05/13/2010 for the course ECON 110D taught by Professor Schmitt-grohe during the Spring '08 term at Duke.

Ask a homework question - tutors are online