$TITLE Model M26: 2x2 Economy with Labor-Leisure Choice $ONTEXT Activity T transforms leisure into labor supply: Production Sectors Consumers Markets | A B W T | CONS --------------------------------------------------------- PX | 80 20 -100 | PY | 20 80 -100 | PW | 300 | -300 PLS | -40 -60 100 | PL | -100 -100 | 200 PK | -60 -40 | 100 --------------------------------------------------------- $OFFTEXT PARAMETERS TL WELFARE REALCONS; TL = 0; $ONTEXT $MODEL:M26 $SECTORS: X ! Activity level for sector X Y ! Activity level for sector Y T ! Labor supply W ! Activity level for sector W (Hicksian welfare index) $COMMODITIES: PX ! Price index for commodity X PY ! Price index for commodity Y PL ! Price index for leisure PLS ! Price index for labor supply (factor L input) PK ! Price index for primary factor K PW ! Price index for welfare (expenditure function) $CONSUMERS: CONS ! Income level for consumer CONS $PROD:X s:1 O:PX Q:100 I:PLS Q:40 I:PK Q:60 $PROD:Y s:1 O:PY Q:100 I:PLS Q:60 I:PK Q:40 $PROD:T O:PLS Q:100 I:PL Q:100 A:CONS T:TL $PROD:W s:0.5 cons:1 O:PW Q:300 I:PX Q:100 cons: I:PY Q:100 cons: I:PL Q:100 $DEMAND:CONS D:PW Q:300 E:PL Q:200 E:PK Q:100 $OFFTEXT $SYSINCLUDE mpsgeset M26 PW.FX = 1; $INCLUDE M26.GEN SOLVE M26 USING MCP; WELFARE = W.L; REALCONS = (PX.L*X.L*100 + PY.L*Y.L*100)/(PX.L**0.5*PY.L**0.5*200); DISPLAY WELFARE, REALCONS; * Solve a counter-factual, tax labor supply at 25% TL = 0.5; $INCLUDE M26.GEN SOLVE M26 USING MCP; WELFARE = W.L; REALCONS = (PX.L*X.L*100 + PY.L*Y.L*100)/(PX.L**0.5*PY.L**0.5*200); DISPLAY WELFARE, REALCONS;