Class Notes (1,100,000)
CA (650,000)
McMaster (50,000)
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ECON 1BB3 (600)
Lecture

ECON 1BB3 Lecture Notes - Free Trade, Physical Capital, Human Capital Flight


Department
Economics
Course Code
ECON 1BB3
Professor
Bridget O' Shaughnessy

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why are Norwegians better off than Ethiopians? 10/4/2012 9:27:00 AM
Productivity: the quality of goo=ds and services that a worker csn produce
for each hour of work
Determinates of productivity:
Physical capital
Human capital
Natural resources
Technological knowledge
Production function: shows how we combine inputs to produce outputs.
Y=AxF(K,L,H,N)
Y=output
A-technology
F-function
L-labour
K-physical capital
H- human capital
N-natural resources
If a production function exhibits constant return to scale, then doubling all
inputs leads to doubling of output.
2Y=AxF(2K,2L,2H,2N)
xY=AxF(xK,xL,xH,xN)
Y/L=AxF(K/L,1,H/L,N/L)
Diminishing Marginal Product:
Product: output
Marginal product: the extra output produced by increasing an input by 1 unit
Diminishing marginal product : the extra output produced by adding the 19th
unit of labour is smaller than the extra output produced by adding the 18th
unit of labour.
Catch-up-effect :
Poor countries tend to grow faster than rich countries
Y/L
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