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A Study on Dynamic General Equilibrium under the Classical Growth Framework

Li, Wu (2010): A Study on Dynamic General Equilibrium under the Classical Growth Framework.

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Abstract

The equilibrium analyses under the classical growth framework mainly concern production processes so far and the utility-maximization of consumers is not considered sufficiently. Treating a consumer as a producer of labor or land-use right etc. with a utility parameter, this paper presents equilibrium formulas taking account of the utility-maximization of consumers, which may facilitate the analysis of dynamic general equilibrium involving both profit-maximizing firms and utility-maximizing consumers under the classical growth framework. For concreteness, some numerical examples with Cobb-Douglas production and utility functions are utilized to illustrate the method of the equilibrium analysis involving utility-maximizing consumers.

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