CH17-CAPITAL-MARKETS(微观经济学-(-南开大学-Lee，-Junqing)).ppt

Chapter 17 CAPITAL MARKETS CONTENTS Capital Determination of Rate of Return The Firm’s Demand for Capital Present Discounted Value Optimal Resource Allocation Over Time Capital Capital The capital stock of an economy is the sum total of machines, buildings, and other reproducible resources in existence at a point in time these assets represent some part of the economy’s past output that was not consumed, but was instead set aside for future production. Present “sacrifice” for future “gain” Rate of Return Rate of Return The single period rate of return (r1) on an investment is the extra consumption provided in period 2 as a fraction of the consumption forgone in period 1 Rate of Return Rate of Return The perpetual rate of return (r?) is the permanent increment to future consumption expressed as a fraction of the initial consumption foregone Rate of Return When economists speak of the rate of return to capital accumulation, they have in mind something between these two extremes a measure of the terms at which consumption today may be turned into consumption tomorrow Determination of Rate of Return Rate of Return andPrice of Future Goods Assume that there are only two periods The rate of return between these two periods (r) is defined to be Rate of Return andPrice of Future Goods The relative price of future goods (p1) is the quantity of present goods that must be foregone to increase future consumption by one unit Demand for Future Goods An individual’s utility depends on present and future consumption U = U(c0,c1) and the individual must decide how much current wealth (w) to devote to these two goods The budget constraint is w = c0 + p1c1 Utility Maximization Utility Maximization The individual consumes c0* in the present period and chooses to save w - c0* to consume next period This future consumption can be found from the budget constraint p1c1* = w - c0* c1* = (w - c0*)/p1 c1* = (w - c0*)(1 + r) Intertemporal Impatience Individuals’ utility-maxi