Ramsey Growth Model 4: Household Budget Constraint

Lectures on the Ramsey Growth Model, based on Romer Advanced Macroeconomics

[@curiousgeorgedong3566]

Hi Dr.Jinkins, I have a question here, like I couldn’t figure out why c(t)=C(t)/A(t). From the Solow model the A could represent factors like technology etc(if I remember that right) but since c(t) stands for consumption per unit shouldn’t c(t)=C(t)/L(t)? I know that’s the definition thought but just think that doesn’t make sense...

[@abhisekmohanty724]

Here C(t) is already in per capita terms. And to convert it into per effective labor terms, we are just dividing it by A(t).

[@nchofuasegaidprotus8040]

​@@abhisekmohanty724wow

[@elivalero7939]

C(t)= Total consumption in the economy/L(t), that's why c(t) = C(t)/A(t) = total consumption in the economy/L(t)A(t)

[@dalkeiththomas9352]

The second line is a bit confusing. If we multiply and divide by A(t) why is the initial wealth term A(0) L(0) / H. Should it just be A(0)/H?

[@arnavm.9529]

We are dividing it by A(t)L(t) and not just A(t). Effective labour is A(t)L(t)