Consider the following two economies: t = 1; 2. u(c) = log(c). = 1. delta = 1. F(K) = KO:5. K1 = 1 t = 1; 2. u(c) = log(c). = 1. delta = 1. F(K) = KO:5. K1 = 4 Setup the social planner problem for both economies, and show the equations that characterize its solution. Calculate the total utility enjoyed by consumers in both economies. Does having 4 times more initial capital make you four times happier? Why?
Consider the following two economies: t = 1; 2. u(c) = log(c). = 1. delta = 1. F(K) = KO:5. K1 = 1 t = 1; 2. u(c) = log(c). = 1. delta = 1. F(K) = KO:5. K1 = 4 Setup the social planner problem for both economies, and show the equations that characterize its solution. Calculate the total utility enjoyed by consumers in both economies. Does having 4 times more initial capital make you four times happier? Why?
Chapter1: Introducing The Economic Way Of Thinking
Section: Chapter Questions
Problem 5SQP
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Transcribed Image Text:Consider the following two economies:
t = 1; 2. u(c) = log(c). = 1. delta = 1. F(K) = KO:5.
K1 = 1
t = 1; 2. u(c) = log(c). = 1. delta = 1. F(K) = KO:5.
K1 = 4
%3D
%3D
Setup the social planner problem for both
economies, and show the equations
that characterize its solution. Calculate the
total utility enjoyed by consumers
in both economies. Does having 4 times more
initial capital make you four times
happier? Why?
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