Aggregate production function, Macroeconomics

Assignment Help:

The aggregate production function

Definition

Imagine the national economy during a short period of time (say one week). We refer: 

  • L: total amount of work used during this period (by all individuals in the economy).
  • K: total amount of capital used.
  • Y: total amount of finished goods produced during this period (real).

It is still the case that Y and L are flows whereas K is a stock. During a short period of time, we can presume that amount of capital is constant. 

Aggregate production function, or simply production function is a function which relates L, K and Y. Precisely, we presume that Y is a function of L and K: 

Y = f (L, K)

In most cases, we won't specify exactly what the function f looks like. Though we always presume that f is increasing in L and K, which is, when we use more labour and/or more capital, we would produce more goods.


Related Discussions:- Aggregate production function

How can an economic development be measured, How can an economic developmen...

How can an economic development be measured? The UN has developed an extensively accepted set of indices to measure development in opposition to a mix of composite (element or

Estimate the interest rate and minimize risk, 1. In December 1979 it was po...

1. In December 1979 it was possible to buy a January 1980 contract in gold at the New York Commodity Exchange for $487.50 per ounce and sell an October 1981 contract for $614.80 on

Explain production externality, Bob's Bee is a small boutique honey manufac...

Bob's Bee is a small boutique honey manufacturer in Texas.  Bob's neighbor is Jon's James.  The more honey Bob produces, the more jam Jon is able to produce; that is, there is

Demand schedule for cupcakes, A cupcake store is located in a mall and is t...

A cupcake store is located in a mall and is the only cupcake store in that mall. The demand schedule for cupcakes (per dozen) is given in the table below. If the marginal cost to p

Product information to consumers, Should the government increase, decrease ...

Should the government increase, decrease or remain the same in its level of intervention when it comes to mandating that companies provide product information to consumers? What ha

Robert''s new way vacuum cleane, Robert's New Way Vacuum Cleaner Company is...

Robert's New Way Vacuum Cleaner Company is a newly started small business that produces vacuum cleaners and belongs to a monopolistically competitive market. Its demand curve for t

Consumption, what is the impact of interest rate in consumption

what is the impact of interest rate in consumption

Adf test, Table Summary of results from the ADF test ...

Table Summary of results from the ADF test Test Number Oil GDP Interest rate Inflation Unemployment Exc

Lag length criteria, In order to estimate aVAR, alag length must be used in...

In order to estimate aVAR, alag length must be used in the estimation. There are many different criteria which can be used to signal the ideal lag length to use.Asteriou & Hall (20

Economies of scale, what are the limitation of economies scales

what are the limitation of economies scales

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd