ECON201 Module 5 Chapter 12-19 City Colleges of Chicago Production function Need help with 3 questions Econ 201 I have attached the worksheet Student Name | Homework Answers
ECON201 Module 5 Chapter 12-19 City Colleges of Chicago Production function Need help with 3 questions Econ 201 I have attached the worksheet Student Name
Class
Professor
Date
Module 5 Assignment Chapter 12-19
1.
Why is it important for people who own stocks and bonds to diversify their holdings?
What type of financial institution makes diversification easier?
2.
Why is productivity related to the standard of living? In your answer be sure to explain what
productivity and standard of living mean. Make a list of things that determine labor productivity.
3.
Use the data on U.S. real GDP below to compute real GDP per person for each year. Then use these
numbers to compute the percentage increase in real GDP per person from 1987 to 2005.
Year
Real GDP (2000 prices)
Population
1987
$6,435,000 million
243 million
2005
$11,092,000 million
296.6 million
FYI
The Production Function
between the quantity of inputs used in production and the quantity of
output from production. For example, suppose Y denotes the quantity of
output, the quantity of labor, Kthe quantity of physical capital, H the
quantity of human capital, and the quantity of natural resources. Then
we might write
A doubling of all inputs
would be represented in
this equation by x = 2. The
right side shows the inputs
doubling, and the left side
shows output doubling.
Production functions with constant
returns to scale have an interesting and useful implication. To see this
implication, set x = 1/2 so that the preceding equation becomes
Y = AFIL, K, H, N),
Y/L = AF(1, KL, H/L, N/L).
where R) is a function that shows how the inputs are combined to
produce output. Ais a variable that reflects the available production
technology. As technology improves, A rises, so the economy produces
more output from any given combination of inputs.
Many production functions have a property called constant returns
to scale. If a production function has constant returns to scale, then
doubling all inputs causes the amount of output to double as well.
Mathematically, we write that a production function has constant
returns to scale if, for any positive number x,
Notice that Y/L is output per worker, which is a measure of productivity
This equation says that labor productivity depends on physical capital
per worker (/), human capital per worker (H/L), and natural resources
per worker (N/L). Productivity also depends on the state of technology, as
reflected by the variable A. Thus, this equation provides a mathematical
summary of the four determinants of productivity we have just
discussed.
XY = AF(XL, XK, XH, XN).
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