Lecture_3_February_2

# Lecture_3_February_2 - LOGISTICS Read this week Chapter 2...

This preview shows pages 1–12. Sign up to view the full content.

February 2, 2010 1 L OGISTICS Read this week Chapter 2 (static consumption-leisure theory) Read for next week Chapter 3 and Chapter 4 (consumption-savings theory) Practice Problem Set 1 Solutions posted on web Practice Problem Set 2 posted on web Reviews consumption-leisure theory Discuss in recitations this week

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

View Full Document
February 2, 2010 2 I N THE N EWS Current Economic Events News Supplement 1 posted on web After Tax Wages News Supplement 2 Value-Added Tax
C ONSUMPTION- L EISURE M ODEL F EBRUARY 2, 2010

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

View Full Document
February 2, 2010 4 B ASICS Introduction Consumption-Leisure Model provides foundation for Labor-market supply function Goods-market demand function An application of the basic consumer theory model… …we will put a macro interpretation on it
February 2, 2010 5 B ASICS Introduction Consumption-Leisure Model provides foundation for Labor-market supply function Goods-market demand function An application of the basic consumer theory model… …we will put a macro interpretation on it Only one time period – no “future” for which to save

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

View Full Document
February 2, 2010 6 B ASICS Introduction Consumption-Leisure Model provides foundation for Labor-market supply function Goods-market demand function An application of the basic consumer theory model… …we will put a macro interpretation on it Only one time period – no “future” for which to save Notation c : consumption (“all stuff”) n : number of hours spent working per week l : number of hours leisure per week (time spent not working) P : dollar price of one unit of consumption (a nominal variable) W : hourly wage rate in terms of dollars (a nominal variable) t : tax rate on labor income n + l = 168
February 2, 2010 7 U TILITY Model Structure Preferences u ( c , l ) with all the “usual properties” Strictly increasing in c Strictly increasing in l Diminishing marginal utility in c Diminishing marginal utility in l Plotted in good-by-good spaces: c u(c,l) leisure u(c,l)

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

View Full Document
February 2, 2010 8 U TILITY Model Structure Preferences u ( c , l ) with all the “usual properties” Strictly increasing in c Strictly increasing in l Diminishing marginal utility in c Diminishing marginal utility in l Plotted in good-by-good spaces: Plotted as indifference curves c u(c,l) leisure u(c,l) leisure c
February 2, 2010 9 U TILITY Model Structure Preferences u ( c , l ) with all the “usual properties” Strictly increasing in c Strictly increasing in l Diminishing marginal utility in c Diminishing marginal utility in l Plotted in good-by-good spaces: Plotted as indifference curves Utility side of consumption-leisure model no different than Chapter 1 model c u(c,l) leisure u(c,l) leisure c

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

View Full Document
February 2, 2010 10 B UDGET C ONSTRAINT Model Structure Consumer must work for his income Y no longer “falls from the sky” Pc Y
February 2, 2010 11 B UDGET C ONSTRAINT Model Structure

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

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 03/08/2011 for the course ECON 602 taught by Professor Chugh during the Spring '11 term at Johns Hopkins.

### Page1 / 35

Lecture_3_February_2 - LOGISTICS Read this week Chapter 2...

This preview shows document pages 1 - 12. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online