SEM 1 - LEC 3 - INTRO Flashcards

1
Q

How do we denote capital and labour

A

We assume that there is a certain number of people available to produce the consumption good.
This number is denoted by L ̄ (labour).

We also assume that there is a certain number of machines to produce the consumption good.
This number is denoted by K ̄ (capital).

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2
Q

what’s the production function given by

A
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3
Q

what’s the profit maximisation problem equation

A
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4
Q

what’s The marginal product of capital (MPK)

A

is the extra amount of output that is produced when one unit of capital is added, holding all other inputs constant.

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5
Q

The marginal product of labour (MPL)

A

is the extra amount of output that is produced when one unit of labour is added, holding all other inputs constant.

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6
Q

For our Cobb-Douglas production function, what is the marginal product of capital is given by

A

Equation (4) tells us that the marginal product of capital is proportional to the average amount that each unit of capital produces, Y/K, where the factor of proportionality is 1/3, the Cobb-Douglas exponent.

The marginal product of capital depends on the ratio L/K: therefore, MPK declines as K rises.

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7
Q

For our Cobb-Douglas production function, what is the marginal product of labour is given by:

A

Equation (5) tells us that the marginal product of labour is proportional to the average amount that each worker produces, Y /L, where the factor of proportionality is 2/3, the Cobb-Douglas exponent.

The marginal product of labour depends on the ratio K/L: therefore, MPL declines as L rises.

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8
Q

how can we summarise, the solution is to hire capital and labour until their marginal products fall to equal r and w, respectively.

A
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9
Q

what are the equations for the following :

Unknown or endogenous variables: Y, K, L, r, w.
Production function: 
Rule for hiring capital:
Rule for hiring labour:
Demand = supply of capital:
Demand = supply for labour:

Parameters or exogenous variables: A ̄, K ̄, L ̄.

A
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10
Q

what’s a partial equilibrium

A

In microeconomics, when supply and demand in a single market determine the price and the quantity sold in the market

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11
Q

how do you solve the general equilibrium model graphically

A
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12
Q

what is the equilibrium wage proportional to

A

the equilibrium wage is proportional to output per

worker:

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13
Q

what is the equilibrium rental rate on capital is proportional to

A

output per unit of capital

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14
Q

how can you show that the sum of payments to labour and capital is exactly equal
total production in the economy.

A
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15
Q

what does per capita mean

A

per person

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16
Q

what’s the output per person and capital per person

A
17
Q

what’s the formula for output per person in equilibrium

A
18
Q

If a country has a high value of A ̄, it will have a higher level of output for any given values of K and L. what is A ̄

A

We can interpret A ̄ as an efficiency or productivity parameter: it measures how productive countries are at using their factor inputs to produce output.

Thus, A ̄ is called total factor productivity or TFP.

19
Q

We can think at A ̄ as a measure of how big the gap is between our model and the data: what’s it sometimes referred to as ?

A

A ̄ is sometimes also referred to as “the residual”

20
Q

what’s the equation for explaining tfp and capital per person

A
21
Q

what’s human capital

A

Human capital is the stock of skills that individuals accumulate to make them more productive.
e.g. education. - People acquiring knowledge and skills will, among other things equal, be more productive members of the society.

22
Q

how to work out table thing

A