PART 3 Flashcards
SPECIFIC FACTORS MODEL
first developed by ______(1892-1970)
Jacob Viner
SPECIFIC FACTORS MODEL
further developed by _______
Paul Samuelson and Ronald Jones
assumes an economy produces two goods and that can allocate its labor supply between the two sectors
SPECIFIC FACTORS MODEL
allows for the existence of factors of production besides labor. Whereas labor is a mobile factor that can move between sectors, other factors are assumed to be specific
SPECIFIC FACTORS MODEL
is one that is stuck in an industry or is immobile between industries in response to changes in market conditions.
Specific Factors
Specific Factors
Land, Capital
Mobile Factors
labor
ability to move factors of production out of one production process into another
Factor Mobility
The percentage of the labor force that is unemployed
Situation where a person actively searches for employment but is unable to find work
Unemployment
It occurs when people voluntarily change jobs
Frictional Unemployment
Similarly, graduates just starting to look for jobs to enter the workforce add to _______
Frictional Unemployment
Searching for a new job, recruiting new workers, and matching the right workers to the right jobs all take time and effort.
Frictional Unemployment
Variation in the number of unemployed workers over the course of economic upturns and downturns
Cyclical Unemployment
Unemployment rises during recessionary periods and declines during periods of economic growth
Cyclical Unemployment
Comes about through a technological change in the structure of the economy in which labor markets operate
Structural Unemployment
Technological changes can lead to unemployment among workers displaced from jobs that are no longer needed
Structural Unemployment
Shows the maximum amount of output that can be produced in an industry
Concept 1: Production Function
Concept 1: Production Function
FORMULA
Qp=f(Kp,Lp)
Qr=f(Kr,Lr)
Predicts that after some optimal level of capacity is reached, adding an additional factor of production will actually result in smaller increases in output
Concept 2: Law of Diminishing Returns (Law of Diminishing Product)
Concept 2: Law of Diminishing Returns (Law of Diminishing Marginal Product)
FORMULA
Marginal product of labor (MPL)- down
Labor (L_-up
K is fixed
change in output that results from complying an added unit of labor
Marginal product of labor
At the start, every unit of input leads to the productive gains
Productive phase
Upon hitting the point of _______ , every additional input will give you a slower gain in output
Diminishing returns
If you reach this phase, every additional input will give you negative returns
Negative Returns
