Do Now:

What is labor productivity?

How does labor productivity relate to long-term economic growth?

How does a rational business owner decide how many workers to

hire?

How does capital relate to labor productivity?

Experiment (calculate the following without calculators)

• 59767896789689-7856785678969987

• 179411/147

• 300*(1.07)^8

• 537*29

• 3459876/19099992

• 436987+56876545+77776564590+878675

• 86757656845/796785457

• (457444486585785*3)+78678558

• 59766696789689-7176781672963387

• 122411/137

• 280*(1.06)^9

• 533*43

• 3422876/190933392

• 436187+56874545+772226564590+87475

• 86757656845/796785423337

• (457444486522285*3)+782228558

• 59766444444689-717678122223463387

• 122411/1371

• 280*(1.03)^9

• 533*33

• 3422276/190933392

• 4361457+56844545+772222224590+87475

• 8672252456656845/796785423337

• (457444343522285*3)+782328558

Do Now

• What are the laws of diminishing marginal returns to capital and the diminishing marginal returns to labor?

• Describe a real life example that illustrates each.

The law of diminishing returns to capital:

• If the amount of labor and other inputs employed is held constant, then the greater the amount of capital already in use, the less an additional unit of capital adds to production.

The Law of diminishing returns to labor

• If the amount of capital and other inputs employed is held constant, then the greater the amount of labor already in use, the less an additional unit of labor adds to production.

Do Now: The so-called Bric countries (Brazil, Russia, China, and India are all experiencing some of the fastest economic growth rates in the world,

much faster than developed nations such as Japan, Germany, and the United States.

Why would this be the case?

Relate it to the law of diminishing return to capital?

• How is labor productivity calculated?

• What are its implications for economic growth?

• What inferences can be made from the latest data on labor productivity about the current state of the economy?

Do Now: • According to the text book, which are the

factors that influence long-term economic growth?

• Which of these do you find to be the most important?

• Are there any limits to long-term economic growth (relate it to the factors).

Capital

• Define Capital, and give a real-world example of capital

• How can the contribution of capital to economic growth face long-term limits (if any)?

Labor

• Define labor, and give a real-world example of labor’s relation to economic growth?

• How can the contribution of labor to economic growth face long-term limits (if any)?

Natural Resources

• Define natural resources, and give a real-world example of natural resource’s relation to economic growth?

• How can the contribution of natural resources to economic growth face long-term limits (if any)?

Technology

• Define technology, and give a real-world example of technology’s relation to economic growth?

• How can the contribution of technology to economic growth face long-term limits (if any)?

Natural Resources

• The scarcity of natural resources is the most significant limiting factor on long-term economic growth.

• List the 3 resources, the scarcity of which you find to be the most significant in their potential to limit longer-run economic growth?

Technology

• Technology is perhaps the biggest unknown variable in determining long-term economic growth.

• In your opinion, which new technology contributed the most to economic growth this past decade?

• How will technology change life by the year 2050?

Technology vs. scarce resources

• Will technology be able to overcome the scarcity of natural resources?

• Are there any natural resources that can not be replaced with new technologies? (if so, which)