the highest amount of output an economy can produce from existing production processes and resources.
Productivity
output per unit of input.
Say's Law
supply creats its own demand
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.
Specialization
the concentration of individuals on certain aspects of production
Division of Labor
the splitting up of a task to allow for specialization of production.
Per Capita Growth
Producing more goods and services per person.
Human Capital
the skills that are embodied in workers through experience, education and on the job training, or more simply, peoples knowledge.
Social Capital
the habitual way of doing things that guides people in how they approach production.
Production Function
an abstraction that shows the relationship between the quantity of inputs used in production and the quantity of output resulting from production.
Constant Returns to Scale
the output will rise by the same proportionate increase as all inputs.
Increasing Returns to Scale
output rises by a greater proportionate increase than all inputs.
Decreasing Returns to Scale
output rises by a smaller proportionate increase than all inputs.
Law of Diminishing Marginal Productivity
increasing one input, keeping all others constant, will lead to smaller and smaller gains in output.
Classical Growth Model
is a model of growth that focuses on the rols of capital accumulation in the growth process.
Convergence Hypothesis
the hypothesis that per capita income in countries with similar institutional structures will gravitate toward the same level of income per person.
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.
New Growth Theory
the theory that emphasizes the role of technology rather than capital in the growth process.
Positive Externalities
positive effects on others not taken into account by the decision maker.
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.
Learning by Doing
improve the methods of production through experience.