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King–Plosser–Rebelo Preferences
In economics, King–Plosser–Rebelo preferences are a particular functional form of utility that is used in many macroeconomic models and dynamic stochastic general equilibrium models. Having originally been proposed in an article that appeared in the '' Journal of Monetary Economics'' in 1988, the corresponding technical appendix detailing their derivation has only been published in 2002. Denote consumption with C, leisure with L and the absolute value of the inverse of the intertemporal elasticity of substitution in consumption with \sigma _c . Strict concavity of the utility function implies \sigma _c > 0. For 0 < \sigma _c < 1 or the utility function has the multiplicatively separable form where is increasing and concave if or decreasing and convex if . Further restrictions are requ ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Economics
Economics () is a behavioral science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. Economics focuses on the behaviour and interactions of Agent (economics), economic agents and how economy, economies work. Microeconomics analyses what is viewed as basic elements within economy, economies, including individual agents and market (economics), markets, their interactions, and the outcomes of interactions. Individual agents may include, for example, households, firms, buyers, and sellers. Macroeconomics analyses economies as systems where production, distribution, consumption, savings, and Expenditure, investment expenditure interact; and the factors of production affecting them, such as: Labour (human activity), labour, Capital (economics), capital, Land (economics), land, and Entrepreneurship, enterprise, inflation, economic growth, and public policies that impact gloss ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Income Effect
The theory of consumer choice is the branch of microeconomics that relates preferences to consumption expenditures and to consumer demand curves. It analyzes how consumers maximize the desirability of their consumption (as measured by their preferences subject to limitations on their expenditures), by maximizing utility subject to a consumer budget constraint. Factors influencing consumers' evaluation of the utility of goods include: income level, cultural factors, product information and physio-psychological factors. Consumption is separated from production, logically, because two different economic agents are involved. In the first case, consumption is determined by the individual. Their specific tastes or preferences determine the amount of utility they derive from goods and services they consume. In the second case, a producer has different motives to the consumer in that they are focussed on the profit they make. This is explained further by producer theory. The models ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Greenwood–Hercowitz–Huffman Preferences
Greenwood–Hercowitz–Huffman preferences are a particular functional form of utility developed by Jeremy Greenwood (economist), Jeremy Greenwood, Zvi Hercowitz, and Gregory Huffman, in their 1988 paper ''Investment, Capacity Utilization, and the Real Business Cycle''.An archive for the original research is here: http://hdl.handle.net/1802/2688 It describes the macroeconomics, macroeconomic impact of technological changes that affect the productivity of new capital goods. The paper also introduced the notions of investment-specific technological progress and capacity utilization into modern macroeconomics. GHH preferences have Gorman form. Often macroeconomic models assume that agents' utility is additively separable in consumption and labor. I.e., frequently the period utility function is something like :u(c,l) = \frac- \psi \frac where c is consumption and l is labor (e.g., hours worked). Note that this is separable in that the utility (loss) from working does not directly a ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Wealth Effect
The wealth effect is the change in spending that accompanies a change in perceived wealth. Usually the wealth effect is positive: spending changes in the same direction as perceived wealth. Effect on individuals Changes in a consumer's wealth cause changes in the amounts and distribution of his or her consumption. People typically spend more overall when one of two things is true: when people ''actually are'' richer, objectively, or when people ''perceive themselves'' to be richer—for example, the assessed value of their home increases, or a stock they own goes up in price. Demand for some goods (called inferior goods) decreases with increasing wealth. For example, consider consumption of cheap fast food versus steak. As someone becomes wealthier, their demand for cheap fast food is likely to decrease, and their demand for more expensive steak may increase. Consumption may be tied to relative wealth. Particularly when supply is highly inelastic, or when the seller is a mon ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Jaimovich–Rebelo Preferences
Jaimovich-Rebelo preferences refer to a utility function that allows to parameterize the strength of short-run wealth effects on the labor supply, originally developed by Nir Jaimovich and Sergio Rebelo in their 2009 article ''Can News about the Future Drive the Business Cycle?'' Let C_t denote consumption and let N_ denote hours worked at period t. The instantaneous utility has the form u\left( \right) = \frac, where X_ = C_^X_^. It is assumed that \theta>1, \psi>0, and \sigma>0. The agents in the model economy maximize their lifetime utility, U, defined over sequences of consumption and hours worked, U = E_ \sum_^ \beta^u\left( \right), where E_ denotes the expectation conditional on the information available at time zero, and the agents internalize the dynamics of X_t in their maximization problem. Relationship to other common macroeconomic preference types Jaimovich-Rebelo preferences nest the KPR preferences and the GHH preferences. KPR preferences When ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Frisch Elasticity
The Frisch elasticity of labor supply captures the elasticity of hours worked to the wage rate, given a constant marginal utility of wealth. Marginal utility is constant for risk-neutral individuals according to microeconomics. In other words, the Frisch elasticity measures the substitution effect of a change in the wage rate on labor supply. This concept was proposed by the economist Ragnar Frisch after whom the elasticity of labor supply is named. The value of the Frisch elasticity is interpreted as willingness to work when wage is changed. The higher the Frisch elasticity, the more willing are people to work if the wage increases. The Frisch elasticity can be also referred to as “λ-constant elasticity”, where λ denotes marginal utility of wealth, or also in some macro literature it is referred to as “macro elasticity” as macroeconomic models are set in terms of the Frisch elasticity, while the term “micro elasticity” is used to refer to the intensive margin elas ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Productivity
Productivity is the efficiency of production of goods or services expressed by some measure. Measurements of productivity are often expressed as a ratio of an aggregate output to a single input or an aggregate input used in a production process, i.e. output per unit of input, typically over a specific period of time. The most common example is the (aggregate) labour productivity measure, one example of which is GDP per worker. There are many different definitions of productivity (including those that are not defined as ratios of output to input) and the choice among them depends on the purpose of the productivity measurement and data availability. The key source of difference between various productivity measures is also usually related (directly or indirectly) to how the outputs and the inputs are aggregated to obtain such a ratio-type measure of productivity. Productivity is a crucial factor in the production performance of firms and nations. Increasing national productivi ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Real Wage
Real wages are wages adjusted for inflation, or equivalently wages in terms of the amount of goods and services that can be bought. This term is used in contrast to nominal wages or unadjusted wages. Because it has been adjusted to account for changes in the prices of goods and services, real wages provide a clearer representation of an individual's wages in terms of what they can afford to buy with those wages – specifically, in terms of the amount of goods and services that can be bought; however, real wages suffer the disadvantage of not being well defined, since the amount of inflation (which can be calculated based on different combinations of goods and services) is itself not well defined. Hence real wage defined as the total amount of goods and services that can be bought with a wage, is also not defined. This is because of changes in the relative prices. Despite difficulty in defining one value for the real wage, in some cases a real wage can be said to have unequivoc ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Substitution Effect
In economics and particularly in consumer choice theory, the substitution effect is one component of the effect of a change in the price of a good upon the amount of that good demanded by a consumer, the other being the income effect. When a good's price decreases, if hypothetically the same "consumption bundle" were to be retained, income would be freed up which could be spent on a combination of more of each of the goods; thus, the new total consumption bundle chosen, compared to the old one, reflects both the effect on freed-up income (the ''income effect''), and the effect of the change on the relative prices of the two goods (the ''substitution effect'', one unit of one good now being traded for a different quantity of the other good, as the ratio of their prices has changed). If income is altered in response to the price change such that a new budget line is drawn passing through the old consumption bundle, but with the slope determined by the new prices and the consum ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Marginal Utility
Marginal utility, in mainstream economics, describes the change in ''utility'' (pleasure or satisfaction resulting from the consumption) of one unit of a good or service. Marginal utility can be positive, negative, or zero. Negative marginal utility implies that every consumed additional unit of a commodity causes more harm than good, leading to a decrease in overall utility. In contrast, positive marginal utility indicates that every additional unit consumed increases overall utility. In the context of cardinal utility, liberal economists postulate a law of diminishing marginal utility. This law states that the first unit of consumption of a good or service yields more satisfaction or utility than the subsequent units, and there is a continuing reduction in satisfaction or utility for greater amounts. As consumption increases, the additional satisfaction or utility gained from each additional unit consumed falls, a concept known as ''diminishing marginal utility.'' This idea is us ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Utility
In economics, utility is a measure of a certain person's satisfaction from a certain state of the world. Over time, the term has been used with at least two meanings. * In a normative context, utility refers to a goal or objective that we wish to maximize, i.e., an objective function. This kind of utility bears a closer resemblance to the original utilitarian concept, developed by moral philosophers such as Jeremy Bentham and John Stuart Mill. * In a descriptive context, the term refers to an ''apparent'' objective function; such a function is revealed by a person's behavior, and specifically by their preferences over lotteries, which can be any quantified choice. The relationship between these two kinds of utility functions has been a source of controversy among both economists and ethicists, with most maintaining that the two are distinct but generally related. Utility function Consider a set of alternatives among which a person has a preference ordering. A utility fu ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Interest Rate
An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, the compounding frequency, and the length of time over which it is lent, deposited, or borrowed. The annual interest rate is the rate over a period of one year. Other interest rates apply over different periods, such as a month or a day, but they are usually annualized. The interest rate has been characterized as "an index of the preference . . . for a dollar of present ncomeover a dollar of future income". The borrower wants, or needs, to have money sooner, and is willing to pay a fee—the interest rate—for that privilege. Influencing factors Interest rates vary according to: * the government's directives to the central bank to accomplish the government's goals * the currency of the principal sum lent or borrowed * the term to m ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
