I am curious how to solve the utility maximization problem if the representative agent has borrowing constraint.


1 Answer 1


The constraint $g(x)\geq 0$ is binding if in optimum $g(x) = 0$ rather than the constraint being slack $g(x)>0$.

  • $\begingroup$ Thank you. How can I solve the problem with such an inequality constraint, like, a' > a_bar? $\endgroup$
    – Carl
    Commented Dec 22, 2020 at 4:21
  • 1
    $\begingroup$ You can make a new question here on the site to get help. Standard procedure is to use Lagrange. $\endgroup$
    – bomadsen
    Commented Dec 22, 2020 at 4:25

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