CAS EC 102 Lecture Notes - Lecture 9: Diminishing Returns, Knowledge Management, Graph Of A Function

• School: Boston University
• Department: Economics
• Course: CAS EC 102
• Professor: Bruce Watson

Document Summary

The relationship between real gdp per hour worked and capital per hour worked, holding the level of technology constant. Y(how much actual stuff) / l (how many labor hours take to produce it) productivity. Given certain state of technology, how much per worker hour function. Concave down - the result of diminishing market capital. If workers have little k, giving them more increases their productivity a lot. If workers already have a lot of k, giving them more increases productivity fairly little. Sooner or later, run out of technological improvements, benefits start to plateau, won"t keep growing and productivity won"t keep improving (economy stagnates) if keep giving same machinery. Technological change helps economies overcome diminishing marginal returns of capital. When curve shifts, something outside happens, such as technological improvements. A model of long-run economic growth that emphasizes that technological change is influenced by economic incentives and so is determined by the working of the market system.