ECON 2H03 Lecture Notes - Lecture 6: Real Wages, Takers, W. M. Keck Observatory

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25 Feb 2016
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The circular flow of dollars through the economy. Supply side: factor markets (supply, demand, price, determination of output/income. Demand side: determinants of c, i, and g. Gdp is the economy"s output of goods and services. Its quantity of inputs called factors of production (labour and capital) Its ability to turn inputs into output, as represented by its production function. 2: tools, machines and structures used in production (excluding residential housing and. L = labour: the physical and mental efforts of workers. The available production technology determines how much output is produced from given amounts of capital and labour: This function shows how much output (y) the economy can produce from k units of capital and l units of labour. It reflects the economy"s level of technology and exhibits constant returns to scale. Constant returns to scale: both labour and capital rise by 20%, output rises by 20%

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