gordo
5
2
gordo has not written any posts yet.

I just want to formalize what others have mostly already commented in the context of your example, which will help draw out some of the subtleties that are missed. In this two sector economy we maximize utility from apples and brass, subject to the constraint that our spending on these items is less than or equal to our income.
This results in the condition that our expenditure on the two items is equal to the ratio of our marginal utilities between them.
In the first period you have this ratio as 1, and in the second period it equals 2. So something has changed in our preferences between the periods. If you wanted to... (read more)
Fair enough - my point was not to come up with the exact quantitative growth rate, but to show some of the assumptions that the original post glossed over.