Introduction to Dynamic Macroeconomic General Equilibrium Models by José Luis Torres Chacon

Author:José Luis Torres Chacon
Language: eng
Format: epub
Publisher: Vernon Art & Science, Inc.
Published: 2016-05-11T12:26:00+00:00

(6.15)

(6.16)

From the above first order conditions for profit maximization, equilibrium prices for production inputs are given by:

(6.17)

(6.18)

6.3.3

Equilibrium of the model

The equilibrium of the model economy is obtained by combining first order conditions for household with first order conditions for the firm, such as:

(6.19)

(6.20)

To close the model, the feasibility constraint of the economy must be defined:

(6.21)

A more formal definition of equilibrium is the following:

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