Barro+PP-III-1.B.

Barro+PP-III-1.B. - Clearing of the Markets for Labor and...

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Macroeconomics - Barro Chapter 6 1 Profit Maximization Real Profit π/ P = A · F ( K d , L d ) − ( w / P ) · L d − ( R / P ) · K d real profit = output real wage payments real rental payments Clearing of the Markets for Labor and Capital Services
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Macroeconomics - Barro Chapter 6 2 Clearing of the Markets for Labor and Capital Services
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Macroeconomics - Barro Chapter 6 3 Clearing of the Markets for Labor and Capital Services The Labor Market Demand for labor ∆(π/ P ) = ∆[ A · F ( K d , L d ) ] − w / P = MPL w / P change in real profit = marginal product of labor real wage rate
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Macroeconomics - Barro Chapter 6 4 Clearing of the Markets for Labor and Capital Services
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Chapter 6 5 Clearing of the Markets for Labor and Capital Services Supply of labor We are assuming that each household supplies a fixed quantity of labor to the labor market. Therefore, the aggregate or market supply of
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This note was uploaded on 02/19/2011 for the course ECON 251 taught by Professor Blanchard during the Spring '08 term at Purdue.

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Barro+PP-III-1.B. - Clearing of the Markets for Labor and...

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