ECON 2202 Lecture 7: Ch2.1-2 the representative firm's problem

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31 May 2019
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2.1 The consumer's problem
Faces budget constrain
The optimal point
The value of the slope of budget line: wage
MRS = Marginal Utility l / Marginal Utility c = w
Example:
!
"
#$%
&
'()*%+#,(-.*%+%
Marginal Utility L: the first order derivative of the
utility function with respect to the choice of leisure.
/!%'(-
%
/!#'()
#
(-*#
()*% '0
#'0
"
12%
&
,3(425
2.2 the representative firm's problem
Assume firm use capital K and labor Nd to produce
output Y.
All wages and profits are in real terms.
The profits the firm makes is the distributed to
consumers as dividends.
The production function
6'78
"
9$:;
&
Y: output
K: capital
Nd: labor demanded (Why we carry d with labor N?
the labor demanded.)
11:01 AM
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