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consumption, income and utility

Question Description: Consider an economy populated by a large number of Farmers (F) and Computer Scientists (CS). Each person divides his 24-hour day into labour and leisure. If a Farmer decides to ...
ZZZ's user avatar
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1 answer
32 views

How should I add my period by period constraint in lagrangian?

This question just suddenly comes to my mind, and I'm not sure what i'm thinking is correct: suppose I want to maximize my cumulative expected utility $E\left[ \sum_{t=0}^{T}\beta^tU(c_t) \right]$ by ...
Eileen's user avatar
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1 answer
59 views

For my bachelors, would it make sense to use C+G (as Consumption + Government Expenditure) as an indicator for the prosperity of the economy?

Because G is also really just consumed by the people, wouldn´t it make sense to measure all the things that people consume to measure the prosperity of an economy? At the end of the day, people in an ...
Matsvei Voltau's user avatar
0 votes
1 answer
100 views

Interest rates vs consumption tax brackets

I know only a little bit about economics, but I have been puzzled why interest rates should be used to combat inflation where direct solutions exist. I have some trouble understanding why interest ...
D. A.'s user avatar
  • 103
3 votes
1 answer
173 views

Intertemporal Utility Optimization For Multiple Goods

I'm building an economic simulation game and I'm trying to solve for the values that a person will spend on each good and the amount they will save in the current period, taking into account all ...
Aidan Loten's user avatar
2 votes
0 answers
77 views

Convex Combination of pairs of points

Is it appropriate/meaningful to write vector/points $(a,b) \le (c,d)$, where i would mean component wise each component is $\le$ Specifically is my example below with reference to concavity ...
CormJack's user avatar
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1 vote
1 answer
193 views

What is the household i’s intertemporal budget constraint (utility depends on household consumption and neighbourhood's average consumption)?

Assume that household i derives utility from consumption, but now lifetime utility is given by the following expression: $$ U_i = \sum_{t=0}^{\infty} e^{ -\rho t}\frac{1}{1-\theta} \left(\frac{C_{i,t}}...
Delia's user avatar
  • 33
0 votes
1 answer
67 views

How does a lack of incentive to purchase new stuff affect economics?

How does a lack of incentive to purchase new stuff affect economics? I've perceived as if a lot of economics is rooted in the idea of continued innovation and consumption, but then I've realized that ...
mavavilj's user avatar
  • 305
1 vote
1 answer
56 views

Lagrangian for the utility-mazimization of a household in a Menu Cost model, first order condition to Ci?

I need to solve the partial derivative to C_i of the integral provided below. I'd be more than happy for some help. Based on the book's answer, we get: Can someone explain how do we get there? And ...
Delia's user avatar
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3 votes
1 answer
72 views

Universal Basic Income (UBI) policy proposals optimal hours worked and consumption

can someone please help me check my work for this question? I want to make sure I did it correctly. Question: Work:
josephjones1472's user avatar
1 vote
1 answer
86 views

Help with checking work for preferences over consumption and leisure question

I was wondering if anyone could help me check my work for the following question, and if I am wrong, help me correct my mistakes? Question: Work:
josephjones1472's user avatar
2 votes
1 answer
36 views

How does a strong or weak economy impact consumption for display?

By display I mean, fashions, events, ceremonies, experiences, lifestyles, things we take to be motivated by signaling and enjoying an image of status and prosperity. Clearly, during a period of ...
Random's user avatar
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1 vote
2 answers
42 views

How does the Cobbs-Douglas Demand system account for diminishing marginal utility?

So the cobbs douglas demand system indicates that the consumption of the capitalist class can be modeled as C=(1+r)K where r represents net profit for that time period, K represents capital stock of ...
Robotic_Cow's user avatar
1 vote
0 answers
8 views

Downloading disaggregated prices and weights for the US

For a thesis, I would have to download disaggregated price indices for the US. I managed to download disaggregated Prices from the BEA. However, the weights are not included. I could also download ...
Howdy's user avatar
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1 vote
0 answers
35 views

What is the difference between consumption smoothing and risk smoothing?

So there is a body of literature that talks about consumption smoothing (e.g. Rosenzweig & Stark 1989) and another body of literature that talks about risk smoothing in the context of insurance. ...
Tea Tree's user avatar
3 votes
0 answers
151 views

Economic interpretation of assumption on utility function

Suppose $u\colon \mathbb{R}_{>0} \to \mathbb{R}$ is a utility function, twice continously differentiable, $u' > 0, u'' < 0$, and the classic Inada conditions hold, i.e., $\lim_{c \to \infty} ...
maximilian43's user avatar
0 votes
1 answer
33 views

Consumption CAPM and compounded risk free rate [closed]

I am studying consumption CAPM and trying to prove, assuming lognormal consumption growth one can show that the continuously compounded risk-free rate is:
emma smith's user avatar
0 votes
1 answer
42 views

Do consumers consume when MPC = MPB

Just need some clarification on an issue im having. Correct me if im wrong, but in the overconsumption of a demerit, consumers consume at S=D as their marginal personal benefit = to their marginal ...
talha.ki17's user avatar
3 votes
1 answer
84 views

For any small perturbation dx, utility cannot change, or else, x* would not be optimal

I am having trouble understanding something that Varian says in "Microeconomic Analysis: Third Edition." For those of you who have the book handy, the question that I have regards something ...
Mistah White's user avatar
0 votes
1 answer
30 views

Is there a place to get raw consumer data?

I was looking at an app on Iphone which allows people to track their meals, and trying to think, how would I build variance of taste into an economics sim ? And the only thing I can think is raw ...
John Sohn's user avatar
2 votes
0 answers
83 views

Closed form solution to consumption-saving model in discrete time

Consider the simplest consumption-savings model of the following form: $$ \max_{\{c_t,a_{t+1}\}_t}\mathbb{E_0}\sum_{t\geq 0} \beta^tu(c_t) \\ a_{t+1} + c_t = (1+r)a_t + y_t \\ y_t \mid y_{t-1} \sim F $...
Jsck's user avatar
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5 votes
0 answers
109 views

Optimal level of consumption in discrete time model with quadratic preferences and infinite horizon

I am trying to derive an expression for the optimal level of consumption in the basic problem: $ max \hspace{1cm} U_t = E_t \left[\sum_{s=t}^{\infty} \beta^{s-t} \left( C_s - a\frac{Cs}{2}^2 \right) ...
Giorgetto's user avatar
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-1 votes
1 answer
55 views

Why do companies and stores never seem to take into consideration the fact that few people want ugly colours of the same product?

In 1997, I traveled far and wide to hunt down an original Tamagotchi. Whereas everyone else had one of the numerous clones, often with many more features, I had to have the real Tamagotchi. When I ...
Epigmenio S.'s user avatar
1 vote
0 answers
24 views

Macroeconomics, price setting and wage setting [closed]

What happens to prcie setting and wage setting when consumption falls? I already looked at what happens to IS-curve and LM-curve.
Vincent Foqué's user avatar
0 votes
1 answer
120 views

Adding scaled CRRA utility

Suppose our utility function is the usual CRRA utility with $\gamma=2$ so that: $$u(C) = \frac{C^{1-\gamma}}{1-\gamma} = -\frac{1}{C}$$ Now suppose there are 2 goods, A and B, available for ...
user34870's user avatar
3 votes
0 answers
62 views

Some basic Consumption CAPM questions

Say we are in a world described by the consumption CAPM. All investors in this world have quadratic utility. Also, assume that consumption is as follows: $$c_{t+1} = (1+m_t)c_t + s_t c_t e_t $$ where ...
elbarto's user avatar
  • 349
1 vote
1 answer
209 views

IS curve, interest rate and consumption

It is possible for the interest rate to affect the expenditure with consumption. An increase in the interest rate could, in principle, lead to increases in savings and, that way, to a decrease in ...
Pedro Cunha's user avatar
1 vote
0 answers
287 views

What is the no ponzi condition for this representative consumer problem? Tags: Initial condition, no-ponzi game

This question is following Farhi et.al. 2014's consumer budget constraint modified to add a government bond and removing money. A simplified version is given below which is pertinent to the question. $...
EndLoop's user avatar
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4 votes
1 answer
82 views

Is $(\mathbb{R}^m)^n$ the real coordinate space of dimension $m\cdot n$?

Very simple question here: say that there are n individuals and each individual $i\leq n$ has a consumption bundle $x_i\in \mathbb{R}^m$ (i.e. there are $m$ types of goods). Suppose that social ...
Nomista's user avatar
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1 vote
0 answers
87 views

What's the conclusion of PIH and LCH?

Both the Life Cycle Hypothesis and Permanent Income Hypothesis concludes the same that permanent income, not the current income, is the primary determinant of consumption. If that is true, then how ...
Khola Khan's user avatar
3 votes
0 answers
109 views

How can you interpret one of the parameters of optimal consumption at the Merton portfolio problem?

Statement: Let the dynamics of wealth of the agent satisfy $$dX_{t} = \pi_tX_t\Big(\mu dt+\sigma dB_{t}\Big)- c_t X_t dt, \qquad \textrm{with}\quad X_0=x_0 \in \mathbb{R},$$ where $(\pi,c)$ is an ...
epine_se's user avatar
3 votes
3 answers
92 views

Why doesn't Nintendo fire up the old factories and re-produce *exact* copies of many of their most popular games, controllers and consoles?

Let's suppose that Nintendo announce tomorrow that they are going to create exact re-releases of the American and European NES, SNES and Nintendo 64 consoles, exactly the same as when they were ...
Nacari L.'s user avatar
1 vote
0 answers
29 views

Estimating $dL/dw$ with direct dependencies using total differential

I have $U(C,L) = U(C) - v(L)$ where $C$ is consumption and $L$ is labor supply. From my first order conditions, $C$ is a function of $w$, wage, and $L$. $L$ is a function of $w$ and $C$. Leisure is $N ...
User186739's user avatar
4 votes
2 answers
7k views

Does salary contribute to GDP under the expenditure approach?

The question really confuses me. On one hand, we can consider the wages as purchasing services from employees. On the other hand, the salary is also part of the cost of the products, thus it isn't &...
Www's user avatar
  • 43
21 votes
7 answers
14k views

Why do low-income earners tend to spend more?

I am reading an article in the Economist. It is discussing the China's unbalanced economy especially the lower household consumption proportion in GDP than the global average. The writer thinks the ...
Pedant's user avatar
  • 311
7 votes
3 answers
580 views

What would be the economic effect of widespread instances of individuals paying off consumer debt?

In light of the economic impact of the recent shutdowns in response to COVID-19, the Australian Government is considering bringing forward planned tax cuts, that were do to be implemented gradually ...
Brett's user avatar
  • 173
1 vote
3 answers
262 views

Relation between demands of $x, y$ and $z$

Question: Consider a consumer with utility function $U(x,y,z)=y\min\{x,z\}$. The prices of all three goods are the same. The consumer has $100 to spend on these three goods.The demands will be such ...
MrAP's user avatar
  • 193
1 vote
1 answer
27 views

Does anybody knows where I should look for a proxy for consumption to estimate a two factor C-CAPM?

Has anybody seen, any textbook recommendation that refers to the proper proxy for consumption. I am trying to estimate a two factor consumption CAPM, namely we I add a second factor apart from ...
Hunger Learn's user avatar
1 vote
1 answer
364 views

How does the GDP multiplier work?

When we learn about the GDP multiplier, it is portrayed as 1/MPS, because savings are supposedly a leak out of consumer spending. However, what I don't understand is aren't those savings spent anyways ...
johnsmith13579's user avatar
1 vote
0 answers
48 views

Why Does Deficit Spending Work Without a Liquidity Trap?

My understanding is that in a functioning economy, the financial market clears when the nominal interest rate is above zero. It is only when it reaches zero that a liquidity trap occurs and the ...
johnsmith13579's user avatar
0 votes
1 answer
142 views

Why does the aggregate consumer spending decrease due to to lower expected future disposable income instead of MPC?

This illustration is from Krugman's macroeconomics textbook, it's supposed to illustrate following situation (assuming that it happened for many people): Conversely, suppose you have a good job but ...
KarmaPeasant's user avatar
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0 votes
1 answer
52 views

Does the investment component of GDP (demand side) identity include expenditures by the government and households?

In the identity GDP=C+I+G+(X-M) does "I" include expenditures by the government and households? For example, if a construction firm builds new residential properties and a household buys this ...
StatsScared's user avatar
1 vote
2 answers
240 views

Marginal rate of substitution notation:

I am having a dumb doubt in writing some slides for an undergraduate class. I want to be consistent with the use in microeconomics but this easy thing is really bugging me: Mas-colell pag. 54 $ ...
KArrow'sBest's user avatar
1 vote
1 answer
339 views

MPC and MPS relationship

I have a question from an old assignment that I cant wrap my head around. ...
Zafir Khalid's user avatar
1 vote
0 answers
97 views

On demand functions and Engel curves

A consumer has utility function $U(x,y)=(x−2)y$, where $x≥2$ and $y≥0$. The price of $x$ is $P_x$, the price of $y$ is $P_y$ and the consumer's income is $I>2P_x$. ($x$ and $y$ do not have to be ...
Ethan Mark's user avatar
0 votes
1 answer
49 views

GDP(Expenditure view of GDP): /Why aren't investments categorized as non-final goods?

My understanding is that consumption = consumption of final goods = whatever consumers buy from companies (with an adjustment for export-import-process + maybe housing is slightly different (not ...
user's user avatar
  • 1
0 votes
1 answer
52 views

Is Buy Nothing Day a classist protest of Black Friday?

I hope this isn't off topic, it seems specifically economic to me even though it probably intersects with other fields of study. Black Friday is seen as an iconic hallmark of consumerism, and Buy ...
Ciudadano's user avatar
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1 vote
0 answers
90 views

What is Economic Interpretation of three nonlinear equations?

I have the following nonlinear system $w$ is wealth $c$ is consumption $r(w)$ is gross return on wealth $a,b, d$ are parameters which are strictly positive and fixed. $$\dot{w} =r(w)w-c$$ $$\...
studentp's user avatar
  • 120
1 vote
1 answer
1k views

Why salaries counted under Government expenditure in GDP

In the expenditure approach of GDP calculation, why are government employee's salary counted under Government approach while for private firms, we don't count salaries. I am unable to understand if ...
Kutsit's user avatar
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1 vote
0 answers
310 views

How to prove that the walrasian demand function $x(p,w)$ is continuous in $p$ and $w$?

If the utility function $u$ is continuous and satisfies local nonsatiation, and walrasian demand function $x(p, w)$ is a function (i.e. always map to only single values), how to prove that $x(p,w)$ is ...
Aqqqq's user avatar
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