Week 2 LT Flashcards
What is the general population growth formula
Lt = L0(1+g)^t
What is the rule of 70
If a country grows at 1% per year, it will take about 70 years for income to double
time taken = 70/g
What does the ratio scale tell us
If the ratio scale graph is a straight line then the growth rate is constant, if not then it is changing
formula for computing the growth rate
g = (Yt/Yo)^1/t -1 (CAGR formula)
Wht is the relation between total GDP growth, per capita gdp and population growth
Total GDP = per capita growth + population growth
costs of economic growth
pollution, climate change, income inequality, loss of jobs due to technological advancements
Economic Growth definition
Long run increases in GDP per capita
What is the production function
Y = A(F^1/3 x L^2/3) Output = productivity parameter x inputs where K = capital stock changes and L = labour force changes
What is the productivity parameter
the ability to produce goods e.g. influenced by technological advances
aka TFP
How do you find the MPK
Differentiate the production function with respect to K and fixing L as a constant
What are constant returns to scale
If K and L increase by x%, then Y also increases by x%
How would you get the output per person in the production functions
divide each component in the formula by the number of workers
What is the allocating resources formula
MaxPI = F(K,L) - rK - wL PI = profits r = rental rate of capital w = wage rate
How do you maximise profits using the allocating resources formula
Hire capital until MPK = r
Hire labour until MPL = w
How do you calculate MPL
Derive the production function with respect to L and keeping K (and obv A) constant
