Question

Explain why we are combining the Life Cycle Model with the Neoclassical Growth model.

Answer 1

The life cycle model explains the consumption pattern of individuals. This model also depicts the best way one can spend money to have a desirable life

The neoclassical growth model explains how capital accumulation and technological change can affect the economy

The main concept in this model is capital deepening which means increasing the amount of capital per worker.

Firstly the consumers' aim is customer satisfaction . Secondly, the suppliers' goal is profit maximization. So the

neoclassical model is a theory that focusses on how the perception of the usefulness of products influences supply and

demand.

By combining the life cycle model, we can reach out to every expense related to people whether it is consumer or supplier. This way it can contribute to neoclassical model.

Hope this will helps with the question friend