Economics Chapter 8

  1. Potential Output
    the highest amount of output an economy can produce from existing production processes and resources.
  2. Productivity
    output per unit of input.
  3. Say's Law
    supply creats its own demand
  4. Rule of 72
    the number of years it takes ofr a certain amount to double in value is equal to 72 divided by its annual rate of increase.
  5. Specialization
    the concentration of individuals on certain aspects of production
  6. Division of Labor
    the splitting up of a task to allow for specialization of production.
  7. Per Capita Growth
    Producing more goods and services per person.
  8. Human Capital
    the skills that are embodied in workers through experience, education and on the job training, or more simply, peoples knowledge.
  9. Social Capital
    the habitual way of doing things that guides people in how they approach production.
  10. Production Function
    an abstraction that shows the relationship between the quantity of inputs used in production and the quantity of output resulting from production.
  11. Constant Returns to Scale
    the output will rise by the same proportionate increase as all inputs.
  12. Increasing Returns to Scale
    output rises by a greater proportionate increase than all inputs.
  13. Decreasing Returns to Scale
    output rises by a smaller proportionate increase than all inputs.
  14. Law of Diminishing Marginal Productivity
    increasing one input, keeping all others constant, will lead to smaller and smaller gains in output.
  15. Classical Growth Model
    is a model of growth that focuses on the rols of capital accumulation in the growth process.
  16. Convergence Hypothesis
    the hypothesis that per capita income in countries with similar institutional structures will gravitate toward the same level of income per person.
  17. Technological Agglomeration
    the geographic concentration of technological advances caused by the tendency of innovations to lead to further innovations in that industry and other industries.
  18. New Growth Theory
    the theory that emphasizes the role of technology rather than capital in the growth process.
  19. Positive Externalities
    positive effects on others not taken into account by the decision maker.
  20. Patents
    legal protection of a technological innovation that gives the owner of the patent sole rights to its use and distribution for a limited time.
  21. Learning by Doing
    improve the methods of production through experience.
Card Set
Economics Chapter 8
Key terms and Questions from Economics Chapter 8