TAsection04sol

TAsection04sol - TA section 05 March 1 2009 Imagine an...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: TA section 05 March 1, 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 .The &rm produces a &nal good that uses labor and capital as input. Labor demand by the &rm is met by labor supply of representative agents and capital demand is also met by saving decision of representative agents, that is l 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...
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.

Page1 / 5

TAsection04sol - TA section 05 March 1 2009 Imagine an...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online