Question

Consider a one-period closed economy in which a representative consumer who likes consumption (C) and leisure (l) has an endowment of time equal to h hours. This economy has access to a technology described by a Cobb-Douglas production function: F(K,N) = K^α N^(1-α ), where the amount of capital K is fixed and given, and N is the labor input. There is no government in this economy.  

^=> Define a Competitive equilibrium for this economy. Show that if the labor market clears, then output must be equal to consumption  

Answer 1