Long run position with consumption preferences
Keywords:
Sraffian model, production prices, utility maximization, surplus value rateAbstract
This paper develops a prices of production Sraffian model with consumption preferences. We assume there are two types of consumers based on the functional distribution of income: workers and capitalists. It is assumed that each type of aggregates represents the sum of individual demands that corresponds to these aggregate preferences. We assume that the profit rate, relative prices (and thus real wage) and aggregate gross quantities are given when deciding consumption. From the point of view of utility maximization, both real wage for workers and profit rate for capitalists are given to solve this maximization. Then, the consumption in each case has to be obtained to satisfy aggregate conditions. The model then depends twice on the profit rate by producing: (1) changes in income of each group; (2) changes in relative prices.
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