16. Consider the RBC model with the following functional forms: 1-a Y₁ = At Kah u(ct) +v(1 − ht) = &- 1-o 1 +0ln(1 - ht) and recall that the budget constraint of the household can be written such that: Ct + Kt+1 = Yt + (1 − 8)Kt (a) Set up and solve the representative firm's profit maximization problem. (b) Describe what is the problem of the households. (c) Explain what is the meaning of the parameter o and how does the household react when σ < 0,σ = 0 and σ > 0. 1-0

16. Consider the RBC model with the following functional forms: 1-a Y₁ = At Kah u(ct) +v(1 − ht) = &- 1-o 1 +0ln(1 - ht) and recall that the budget constraint of the household can be written such that: Ct + Kt+1 = Yt + (1 − 8)Kt (a) Set up and solve the representative firm's profit maximization problem. (b) Describe what is the problem of the households. (c) Explain what is the meaning of the parameter o and how does the household react when σ < 0,σ = 0 and σ > 0. 1-0

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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(1). derive and sketch the optimization condition for profit maximization.
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