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5

Partial answer: for simplicity let $P_c =1$. The budget constraint: $c= wn + \Pi$ Simplify (plug in $\Pi$): $c= F(n)- fc$ Goods clearing: $c = F(n)$ The household's budget constraint is inconsistent w/ goods market clearing. The firm pays a fixed cost that doesn't go to anyone. In a "true GE model" all payments have to go to someone in the economy. ...


3

Your guess that somewhat is happening with the slope was a good one. The slope will indeed change. If you want to draw that new Demand line ($D_1$) it has to start at the exact same point of the old demand line (if wages are zero the percantage tax will be zero too). The correct intersection with the Y-Axis would be: $(1-t) W_0$ (this simply means one minus ...


0

I think it should be noted that any real price, in this case wage, is actually the price of something in units of a good. In this case, P the price level is the price of a typical consumed basket of goods. The real wage W/P is how much you are paid in "baskets". Economists care about real prices because nominal prices are in units of money, which ...


3

This is quite broad question, in fact the full answer to your question would probably require a textbook on urban economics, so also this answer is based on one; Brueckner (2011) Lectures on Urban Economics, MIT press, which is whole book largely dedicated to this (and other urban economics) issue(s). I will try to provide summary of main arguments found in ...


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