Section 3

# Section 3 - UNIVERSITY OF CALIFORNIA BERKELEY Dorian...

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

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

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: UNIVERSITY OF CALIFORNIA, BERKELEY Dorian Carloni Department of Economics ECON 100B, Fall 2011 SECTION 3: Aggregate Production and Productivity, Part 1 3.1. Aggregate Production We are going to work with a production function Y = A & F ( K;L ) , in which: ¡ the factors of production are: 1. Labor (L): the total number of worker hours 2. Capital (K): the stock of productive assets (real value of physical capital) ¡ technology (or total factor productivity) (A): is a measure of the productivity of the factors of produc- tion. It takes into account how productive labor and capital are together. We assume a Cobb-Douglas production function: F ( K;L ) = K & L (1 & & ) : ¡ & measures the contribution of capital to the production output. It can also be de&ned as the capital share of national income. Estimated to be : 3 for the U.S. economy ¡ constant returns to scale : F ( ¡K;¡L ) = ¡ & F ( K;L ) . Underlying idea: if you double ( ¡ = 2 ) the amount of both labor and capital you are using, output ( Y ) will also double. Using the Cobb-Douglas functionwill also double....
View Full Document

## This note was uploaded on 03/18/2012 for the course ECON 100B taught by Professor Wood during the Spring '08 term at Berkeley.

### Page1 / 4

Section 3 - UNIVERSITY OF CALIFORNIA BERKELEY Dorian...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online