let production function be Y=AN.
Price setting relatin is P=(1+v)(W/A) WHERE v is muew
Wage setting is W=A^e P^e(1-u)
and it is given that N=(1-u)L
derive the aggregate supply curve....
hey yaar.. i havent done this chapter so far..
but giving it a try ..
what i think is agg supply is relation between total output and price level in the economy
P = f(Y) or Y= f(P)
we can substitute N into Y=AN , Y= A(1-u)L
substitute W=A^e P^e(1-u) into P=(1+v)(W/A)
Gives P= (1+v)A^eP^e(1-u)/A
therefore P= (1+v)A^(e-1) P^e x (1-u)
A^(e-1)=(P/P^e)/(1+v)(1-u)
A={(P/P^e)/(1+v)(1-u)}^(1/e-1)
Now this can be substituted into Y= A(1-u)L => Y={(P/P^e)/(1+v)(1-u)}^(1/e-1)x (1-u)x L
At the end we get Y= {(P/P^e)/(1+v)}^(1/e-1) x (1-u)^(e/e-1)x L
This is the equation according to me
I hope the algebra is clear :) good morning :)
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