Pareto optimal allocations
State the constrained optimization problem that allows you to find the pareto optimum allocation for the one period closed economy model.
The answer is
One period interest: GDP,CONS, employment
Static
Closed economy (everything that is exchanged in the economy is done by only it's agents)
Agents:
- Representative consumer (c*,l*)=n^(s*)
- Representative firm (y*,n^(d*))=gdp
- Government (G,T)=expenditure
Agents interact
Equilibrium= markets clear (consumption good, labor)
Y^(eq)=C^(eq)+G^(eq)
Competitive: (w) - all agents take prices as give and behavior rationally for those prices.
If the answer is not correct, please use the correct answer to solve.