ECON 2400 Lecture : Ex6_one_period_model_math_s.pdf
4 Dec 2013
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Example 6: solving the one-period, closed-economy macroeconomic model mathematically. Note: the mathematical derivations presented here are optional. There are for the students who are interested in solving the model mathematically. Is a positive constant, 0 < < 1, c is the quantity of consumption, and l is the quantity of leisure. The consumer is endowed with h units of time, works at the market real wage, w, receives real dividend from rms, , and pays a lump-sum tax, t , to the government. Assume that n is a very large number. Each economic agent acts as a price taker in perfectly competitive markets. The economic environment facing the representative consumer and the representative rm has been described in questions 1 and 2. The representative con- sumer maximizes utility, u , taking as given the values of h, w, and t . Rm maximizes its real pro t, , taking as given the values of w, k, and z.
