ECON 2GG3 Study Guide - Final Guide: Market Clearing, Production Function, Utility
15 Oct 2015
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Dc/dr or dc/dl: mrs: rate at which consumer is willing to sub consumption goods for leisure and be equally well off, mpl: change in output (dc) from using little bit more labour, at utility maximizing optimum (highest attainable indifference curve touches production function) producer"s perspective consumer perspective dc/dl, rate at which consumer is willing to trade off leisure for coconuts = rate at which labour is transformed into coconuts. Rc as a firm: rc is a, utility maximizing consumer & profit maximizing firm (separately) (1) profit maximizing firm coconuts numeraire good (price of coconut ) coconut output level = c, rc"s wage = w, real wage = money wage/ money $ of good. Profit max: w = mpl (isoprofit, prodn. fn. , quantity of output supplied = c, quantity of labour demanded = l, coconut and labour markets both clear, utility max, w = mrs (budget, indifference, quantity of output demanded = c, quantity of labour supplied = l*
