ECON 313 Lecture Notes - Lecture 2: Orange Juice, Juicer, Production Function
30 Nov 2017
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Document Summary
Oranges are the input to make this shit work. We don"t care about them because they are intermediate goods (inputs) Production function (f) linking the two outputs together. 1 juicer and 1 worker make 1 juice. Is how capital and labor interact (between 0 and 1) When is close to 0, capital doesn"t really matter. When is close to 1, labour doesn"t really matter. Output per worker depends on capital intensity. Hence, we have drk and the same goes for l if l is increased. Two fundamental assumptions of this growth model. Always possible to sell the good and it will never be stolen. All of y goes back to entrepreneur (property rights are secure) Allows entrepreneur to use savings to invest into the company to make it even more profitable. Reinvest because in this model, investment always pays off! Capital stock depreciates at a rate of. 1 what you add (or invested) in the business last year.
