1. Consider the following one-period model with a representative consumer, a representative firm and a government. Representative consumer's problem is given by: max In(c) + In(1) subject to : c= (1- t)ļw(h- 1) + ]. where c, I, w and z have their usual definition. The consumer has h units of time for working or consuming it as leisure. The government imposes a proportional tar of t on income as shown in the budget constraint for the representative consumer to finance government expenditure of G. The representative firm's problem is given by: max K"N- wNa (a) Define the competitive equilibrium for this economy. (b) Derive the first order conditions for the consumer's and firm's maximization problems.

1. Consider the following one-period model with a representative consumer, a representative firm and a government. Representative consumer's problem is given by: max In(c) + In(1) subject to : c= (1- t)ļw(h- 1) + ]. where c, I, w and z have their usual definition. The consumer has h units of time for working or consuming it as leisure. The government imposes a proportional tar of t on income as shown in the budget constraint for the representative consumer to finance government expenditure of G. The representative firm's problem is given by: max K"N- wNa (a) Define the competitive equilibrium for this economy. (b) Derive the first order conditions for the consumer's and firm's maximization problems.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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