Class Notes (784,622)
Canada (481,264)
ECON 330D1 (20)
Lecture 4

Econ 330 Lecture 4 September 18 2012.docx
Econ 330 Lecture 4 September 18 2012.docx

3 Pages
Unlock Document

McGill University
Economics (Arts)
ECON 330D1
Daniel Barczyk

Econ 330 Lecture 4 September 18 2012 Y= F(K,L) Production Function + Factors of Production 2 Economic Profit = Y – MPL *L– MPK * K MPL *L= Total Wage MPK*K = Total Return MPL = on graph equals w/p CRS z*y Because we are interested in the division of national income Y= MPL *L +MPK *K + Economic profit By Eulers theorem a CRS prod function can be written as Y= FL(K,L)=MPL*K+MPL*L  Economic profit are zero In reality firms own capital, people own firms Accounting profit = economic profit + mpk *k The Cobb- Douglas production function Observation: the division of national income between capital and labor had been roughly constant over a long period of time Sales Labor Capital Constant factor shares capital income= ∞y increases capital share of income 1Output 2 K = Kbar, L= Lbar Douglas asked cobb what production function would produce constant factor shares if factor shares . if factor always earned their marginal products 3Y= F(K,L)=AK L 1- 1. It has CRS ∞ 1-∞ A(zK) (zL) Az K z 1-L 1-∞ ∞ 1-∞ Z*AK L Y 2. MPL = (1∞) AK ∞ L-∞ a ∞ MPL = (1-∞) AK L /L MPK= ∞ * y/k 1-∞ a-∞ MPK- ∞ak L MPK*K= ∞ *y
More Less

Related notes for ECON 330D1

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.