Chapter 9 in the textbook
We don't have a three-period model.
The key difference between one-period and two-period is qualitative.
the model has the future.
Not only one more period, but one more dimension - time.
One period model only talks about today.
Where we deal with changes over time. We move from static model
to dynamic models.
A fully dynamic model can be complicated
We can summarize the gist of the full dynamic model by simply
limiting the number of periods.
Now consider a two-period model
many identical consumers who will exist for two period.
Many* = consumers don't have the power to manipulate the
We will not consider explicitly the leisure-labor supply decision
Introduce saving decision
Consumer's budget constrains
! " # $ % & '
s=savings for tomorrow
* " +
" %(& '(
R= interest rate
!(& %(" '($ #
' " +
# $ !(
* " + &%(
*" + " '(
* " +
Thursday, October 4, 2018