ECON 1BB3 Lecture Notes - Marginal Product, Production Function, Human Capital Flight

• School: McMaster University
• Department: Economics
• Course: ECON 1BB3
• Professor: Bridget O' Shaughnessy

Document Summary

Productivity: the quantity of goods and services that a worker can produce for each hour of work. Determinants of productivity: physical capital, human capital, natural resources (renewable, non-renewable, technological knowledge. Production function: shows how we combine inputs to produce output. Equation: y = a * f (k, l, h, n) If a production function exhibits constant returns to scale, then doubling all inputs leads to a doubling of output. Examples: 2y = a * f(2k, 2l, 2h, 2n, 100y = a * f(100k, 100l, 100h, 100n, xy = a * f(xk, xl, xh, xn, (y/l) = a * f(k/l, 1, h/l, n/l) 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.