ECN 204 Lecture Notes - Foreign Direct Investment, Diminishing Returns, Human Capital

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Productivity: the quantity of goods and services produced from each hour of a worker"s time. Y= real gdp (quantity of output produced), l = quantity of labor, y/l= productivity (output per worker) Physical capital per worker: the stock of equipment and structures that used to produce goods and services. Works are more productive if they have tools with which to work. Factors of production are the inputs used to produce goods and services such as labor. Capital is a factor of production used to produced all kinds of goods and services including more capital. K = physical capital, k/l = capital per worker. Human capital per worker: the knowledge and skills that works acquire through education, training, and experience. H= human capital, h/l = the average worker"s human capital. Natural resources per worker: the inputs into the production of goods and services that are provided by nature such as land, rivers, and mineral deposits.