Leith, Campbell B. (contributor); … - 2008
household’s consumption basket,
X
k
t
, is an aggregate of a continuum of habit-adjusted final goods, indexed by i and of …
measure 1,
X
k
t
=
µZ
1
0
³
C
k
it
−θC
it−1
´
η−1
η
di
¶
η
η−1
,
3
where C
k
it
is household k’s consumption of good i and C … basket is chosen in order to minimize expendi-
tures, and the demand for final goods is
C
k
it
=
µ
P
it
P
t
¶
−η
X
k
t
+θC
it …