ECN 600 Chapter Notes - Chapter 4: Barter, Budget Constraint, Utility

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Where u is the utility function, c is the quantity of consumption, and l is the quantity of leisure. bundle that contains more consumption, more leisure, or both: the actual level of utility, however, is irrelevant. In a barter economy, all trade involves exchanges of goods for goods: the time constraint for the consumer is; l+ns=h. l being leisure time and ns being labour supply or time spent working. The consumer"s real disposable income: consumer"s real disposable income wage income plus dividend income, labour time is sold by the consumer in the labour market at a price w in minus taxes terms of consumption goods. That is, one unit of labour time exchanges for w units of consumption goods. In general, the relative price of a good x in terms of a good y is the number of units of y that trade for a unit of x.

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