101-2011-L8

101-2011-L8 - Econ101 Lecture8 Firmsproblem...

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Econ 101 Lecture 8 Firm’s problem
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Consumers and firms n Consumers demand consumption goods and  supply labor n Firms supply consumption goods and  demand labor n Their respective problems are very similar n Consumers choose quantity of goods and labor  supply  maximizing utility  given budget constraint n Firms choose quantity of goods and labor demand  maximizing profits  given the production technology
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Introducing another good friend Representati ve Firm (RF) § Like the representative consumer, the RF acts as a stand-in for all producers in  the economy § Less controversial that the representative consumer (will show why in a moment)
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The Aggregate Production  Function n Y   is  output  (think of it as GDP) n K   is  capital  (plants, equipments, etc.)  n exogenous in our static model, will become  endogenous later n Nd   is  labor , chosen by the firm n z   is  total factor productivity  (TFP) ) , ( d N K zF Y =
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What is TFP? n What factors other than growth in capital  and labor allow a given economy to  produce more (or less) over time? ) , ( d N K zF Y =
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§ Technological innovation
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This note was uploaded on 12/26/2011 for the course ECON 101 taught by Professor Dumbass during the Fall '08 term at UCSB.

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101-2011-L8 - Econ101 Lecture8 Firmsproblem...

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