CH3 ECO 3203 - Labor productivity and real wages • Some...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 3 Basic Topics GDP measures total output and total income. Q1: What determines how much output the economy can produce? Output depends on the inputs What are the inputs? Potential output vs. actual output The production function: Measuring total factor productivity Constant returns to scale Marginal product and diminishing returns Cobb Douglas production function The competitive firm assumption: Firms are price takers Assuming constant returns to scale and perfect competition means economic profit is zero in the long run Economic profit vs. accounting profit The firm’s demand for labor and capital: Factor markets Labor supply and demand Marginal product of capital and the user cost of capital How income is distributed among labor and capital Based on marginal productivity of each factor
Image of page 1

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

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Labor productivity and real wages • Some empirical data Q2: Why does the demand for goods and services (C+I+G+NX) equal the supply of goods and services (potential output) in the long run? The demand for goods and services: • Consumption and saving • Investment • Government spending • Ignore net exports for now (topic of chapter 5) • Factors that affect consumption, investment, and government spending • Desired capital stock and the user cost of capital Definitions: • National saving • Private saving • Public or government saving • Crowding out If potential output = C+I+G then national saving = investment The real interest rate adjusts in the loanable funds market to balance national saving and investment. Equilibrium in the loanable funds market for a closed economy....
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern