I am curious how to solve the utility maximization problem if the representative agent has borrowing constraint.
$\begingroup$
$\endgroup$
Add a comment
|
1 Answer
$\begingroup$
$\endgroup$
2
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? $\endgroup$– CarlDec 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. $\endgroup$– bomadsenDec 22, 2020 at 4:25