student_ch3

student_ch3 - Ch3.Nationalincome CHAPTER 3 National Income...

Info iconThis preview shows pages 1–11. Sign up to view the full content.

View Full Document Right Arrow Icon
1 CHAPTER 3 National Income Ch3. National income
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 CHAPTER 3 National Income In this chapter, you will learn: In this chapter, you will learn: How much do the firms produce in the economy? what determines the economy’s total output/income Who gets the income from production? how the prices of the factors of production are determined
Background image of page 2
3 CHAPTER 3 National Income Outline of model A closed economy, market-clearing model Supply side factor markets (supply, demand, price) determination of output/income Demand side determinants of C, I, and G Equilibrium goods market loanable funds market
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
4 CHAPTER 3 National Income
Background image of page 4
5 CHAPTER 3 National Income Factors of production K = L =
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
6 CHAPTER 3 National Income The production function:  Y = F(K,L) shows how much output ( Y ) the economy can produce from K units of capital and L units of labor reflects the economy’s exhibits
Background image of page 6
7 CHAPTER 3 National Income Returns to scale:  A review Initially Y 1 = F ( K 1 , L 1 ) Scale all inputs by the same factor z : K 2 = and L 2 = ( e.g. , if z = 1.2, then all inputs are increased by 20%) What happens to output, Y 2 = F ( K 2 , L 2 )? If constant returns to scale ( ), If increasing returns to scale ( ) , If decreasing returns to scale ( ) ,
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
8 CHAPTER 3 National Income Returns to scale:  Example 1 ( , ) F K L KL = ( , ) ( )( ) F zK zL zK zL = constant returns to scale for any z > 0
Background image of page 8
9 CHAPTER 3 National Income Returns to scale:  Example 2 ( , ) F K L K L = + ( , ) F zK zL zK zL = + decreasing returns to scale for any z > 1
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
10 CHAPTER 3 National Income Returns to scale:  Example 3 ( , ) F K L K L = + 2 2 ( , ) ( ) ( ) F zK zL zK zL = + 2 2 increasing returns to scale for any z > 1
Background image of page 10
Image of page 11
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/25/2011 for the course ECON 321 taught by Professor Sani during the Spring '08 term at Rutgers.

Page1 / 40

student_ch3 - Ch3.Nationalincome CHAPTER 3 National Income...

This preview shows document pages 1 - 11. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online