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Lecture

# Classroom Lecture Notes - Kings

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School
Western University
Department
Economics
Course
Economics 2152A/B
Professor
Ayoub Yousefi
Semester
Fall

Description
Chapter 3, Productivity, Output, and Employment 0.3 0.7 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: 0.3 0.7 A = Y/F(K,N) A = Y/K x N N = labour K = Capital Y = Output 0.3 0.7 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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