tailieunhanh - 15. Principles of Economics (Brief Edition)_2e (14)

Chapter 14: Economic . Show how small differences in growth rates lead to. large differences in living . Explain why GDP per capita is average labor. productivity times the proportion of the population. . Discuss the determinants of average labor. . Discuss and evaluate government policies that promote. economic . Compare and contrast the benefits and costs of. economic . Describe the trade-offs between economic growth and. environmental quality. McGraw­Hill/Irwin Copyright © 2011 by The McGraw­Hill Companies, Inc. All rights reserved. Living Standards.• Use an economic model to study the remarkable. rise in living standards. – Real GDP per person is a measure of the goods. available to a typical person.• One clue to growing prosperity in the 20th. century – GDP per person today is five times. greater than it was in 1929.• Comparisons across long periods are. complicated by lack of data. – The variety, quantity, and quality of goods increased. enormously in the 19th and 20th century. 14­2 Compound Interest.• Compound interest pays interest on the original. deposit and all previously accumulated interest.• Differences in interest rates matter. Interest Rate. Value of $10 after 210 years. (%). 2 $. 4 $37,. 6 $2,061,.• Growth rates in GDP per capita have the same effect. as interest rates. – Relatively small growth in GDP per capita has a very. large effect over a long period.• In the long run, the growth rate of an economy matters. 14­3 Real GDP per Capita.• Notation. – Y = real GDP. – N = number of people employed. – POP = population• GDP per capita is the product of output per worker. and the share of the total population that is working.• Consumption per person depends on. – How much each worker produces and. – The share of people working. 14­4 Average Labor Productivity.• US average labor productivity is. – 24 times that of Indonesia. – 100 times that of Bangladesh.• Six factors determine average labor productivity. capital. capital. and other natural resources. . and management. and legal environment. 14­5 Six factors determine average labor productivity: 1. Human Capital.• Human capital comprises the talents, education,. training, and skills of workers. – Human capital increases workers productivity.• Germany and Japan used human capital to. rebuild after World War II. – Professional scientists and engineers. – Apprentice and on-the-job training emphasized. – Japanese increased emphasis on early education.• Cost – Benefit Principle applies to building. human capital. – Premium paid to skilled workers. 14­6 2. Physical Capital.• More and better capital increases worker. productivity.• Factory owner employs two people and adds capital. – Each machine requires one dedicated operator. Number of Output per Hours Worked Output per. Machines Week per Week Hour Worked. 0 16,000 80 200. 1 32,000 80 400. 2 40,000 80 500. 3 40,000 80 500.• More capital increases output per hour.• Diminishing returns to capital. 14­7 3. Land and Other Natural. Resources.• Inputs other than capital increase worker.

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