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Revise the two supply and demand lectures #845

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Revise the two supply and demand lectures #845

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6 changes: 6 additions & 0 deletions lectures/cons_smooth.md
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Expand Up @@ -130,6 +130,12 @@ By **smoother** we mean as close as possible to being constant over time.

The preference for smooth consumption paths that is built into the model gives it the name "consumption-smoothing model".

This lecture takes the gross interest rate $R$ as given from outside the model.

{doc}`supply_demand_multiple_goods` studies a general equilibrium model in which $R$ is the relative price of goods at two dates.

There $R = \beta^{-1}$ when a consumer's endowment is the same at both dates, so the condition that Friedman and Hall assumed emerges as an equilibrium outcome.

We'll postpone verifying our claim that a constant consumption path is optimal when $\beta R=1$
by comparing welfare levels that comes from a constant path with ones that involve non-constant paths.

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