ECON 3430 Lecture Notes - Lecture 10: Fiat Money, Commodity Money, Barter
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Econ 3430 lecture 10 notes using calculus and barter and commodity money. Introduction: with the use of simple calculus, we can derive mathematical representations of the demand of fiat money from specific utility functions. If you do not know calculus, simply skip this appendix: the problem facing a young person born at t is to maximize utility, which is a function, If we use the budget constraints to substitute for c1,t and c2,t+1 in the utility function, we can write utility as the following function of qt: 1. 32 is simply a mathematical expression of the statement that utility is maximized where an indifference curve is tangent to the budget line: suppose that utility is given by. In a commodity money economy, the goods one owns may be traded for a good that is not consumed but is traded, in turn, for the good one desires.