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Lecture

# Classroom Lecture Notes - Kings

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Western University

Economics

Economics 2152A/B

Ayoub Yousefi

Fall

Description

Chapter 3, Productivity, Output, and Employment
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Real GDP = Q = Y = A x F (K,N) Y = A x K X N
Note: Y, K and N can be measured directly, but A can be calculated indirectly.
Cobb – Douglas Production Function:
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A = Y/F(K,N) A = Y/K x N
N = labour
K = Capital
Y = Output
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The shape of the production function, Y = A x K x N
To show the production function graphically, we hold one of the 2 factors of production constant and
graph the relationship between output and the other factor.
Y = A x K x N 0.7
0.3 0.7
Y = (16.8) x (K ) x (15.70)
0.3
Y = 115.75 K
0.3
If K = 1,798, Y = 115.75 (1,798) then, Y = 1,098 billions
Features of the production function:
1. Starts from the origin
2. Slopes upward (positive), Change in output due to a one unit change in capital.
- Marginal product of capital, MP K

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