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Components of the aggregate production function

Economists construct different production functions depending on the focus of their studies. [link] presents two examples of aggregate production functions. In the first production function, shown in [link] (a), the output is GDP. The inputs in this example are workforce, human capital, physical capital, and technology. We discuss these inputs further in the module, Components of Economic Growth.

Aggregate production functions

The first illustration shows that workforce, human capital, physical capital, and technology produce GDP. The second illustration shows that human capital per person, physical capital per person, and technology per person produce GDP per capital.
An aggregate production function shows what goes into producing the output for an overall economy. (a) This aggregate production function has GDP as its output. (b) This aggregate production function has GDP per capita as its output. Because it is calculated on a per-person basis, the labor input is already figured into the other factors and does not need to be listed separately.

Measuring productivity

An economy’s rate of productivity growth is closely linked to the growth rate of its GDP per capita, although the two are not identical. For example, if the percentage of the population who holds jobs in an economy increases, GDP per capita will increase but the productivity of individual workers may not be affected. Over the long term, the only way that GDP per capita can grow continually is if the productivity of the average worker rises or if there are complementary increases in capital.

A common measure of U.S. productivity per worker is dollar value per hour the worker contributes to the employer’s output. This measure excludes government workers, because their output is not sold in the market and so their productivity is hard to measure. It also excludes farming, which accounts for only a relatively small share of the U.S. economy. [link] shows an index of output per hour, with 2009 as the base year (when the index equals 100). The index equaled about 106 in 2014. In 1972, the index equaled 50, which shows that workers have more than doubled their productivity since then.

Output per hour worked in the u.s. economy, 1947–2011

The graph shows that output per hour has steadily increased since 1960, when it was $32, to 2014, when it was $106.148.
Output per hour worked is a measure of worker productivity. In the U.S. economy, worker productivity rose more quickly in the 1960s and the mid-1990s compared with the 1970s and 1980s. However, these growth-rate differences are only a few percentage points per year. Look carefully to see them in the changing slope of the line. The average U.S. worker produced over twice as much per hour in 2014 than he did in the early 1970s. (Source: U.S. Department of Labor, Bureau of Labor Statistics.)

According to the Department of Labor, U.S. productivity growth was fairly strong in the 1950s but then declined in the 1970s and 1980s before rising again in the second half of the 1990s and the first half of the 2000s. In fact, the rate of productivity measured by the change in output per hour worked averaged 3.2% per year from 1950 to 1970; dropped to 1.9% per year from 1970 to 1990; and then climbed back to over 2.3% from 1991 to the present, with another modest slowdown after 2001. [link] shows average annual rates of productivity growth averaged over time since 1950.

Questions & Answers

What is price elasticity of demand?
Kanishka Reply
price elasticity of demand is a measure used in economics to show elasticity of quantity demanded of good or service to get a change in it's price while nothing but price changes.
Price elasticity of demand is a measure of the change in the quantity demanded of a product in relation to its price change Price elasticity of demand = % change in quantity demand / % change in Price
Pls where can I found PRICE CONTROL on this app
Samuel Reply
top left corner
A situation in an economy with one producer but many consumers
Kabali Reply
What is the theory of population according to Malthus?
What is the Malthusian population theory?
The Malthusian theory of population state that, where there are means of substinence like food, human beings have the tendency to procreate (ie.give birth) without restraint (ie. control).
he stated that population unchecked grows at a geometric progression ie 1,2,4,8,16 while the means food subsistence grows at arithmetic progression ie 1,2,3,4,5---- he declared that population has the tendency to outstrip the means of subsistence
What is money?
money is any commodity that act as a medium of exchange
money is medium of exchange which is use in taking goods and giving some of it's worth or money value
what is a debit card and a credit card?
a debit card is a payment card used instead of cash while purchasing
a credit card is a payment card issued to users to enable cardholder to pay a merchant for goods and services
oky tanx
What is an inferior good.?
In economics, an inferior good is a good whose demand decreases when consumer income rises (or demand rises when consumer income decreases), 
what is monopoly
Richmond Reply
a market situation when there is only one seller of a product representing whole industry.
where one business is the dominant one in that market. It determines the market price as they are price makers. No entry, no competition.
it is a market situation where is a single seller and many buyer hear the seller is the price maker the is no free entering and exit in this market
A situation in the economy where there is one producer and many consumers
A market situation where there is one producer and many consumers.
Balance of payments for 2018
Mahlatse Reply
what is monopoly and what is monopolaist
Javid Reply
what is the affect of rise in value of dollar ?
monopoly"a single firm or company owns all or nearly all of the market for a given type of product or service "monopoly is a price maker ...barrier of entry ,non availability of close substitute.
monopolistic competition or market is a situation where there are few or many firm producing identical but differentiated product .eg difference in advertisement ,packing etc
monopolistic competition or market is a situation where there are few or many firm producing identical but differentiated product .eg difference in advertisement ,packing
monopoly is a market situation ...where there is a single seller and large number of buyers deals with commodities having no close substitutes......here the sellers are price makers... there is restrictions in the entry and exit of new firms in this market structure....
what is money?
money is a medium of exchange.....through which...commodities are bought and sold
money is a medium/means of exchange that generally accepted by law
What is tranfer earnings
what is savings income?
transfer earning is the minimum income that a factor is willing to accept in an occupation,it is also call the supply price of a factor
what is envelope curve
what is depreciation
depreciation means decrease in value of a assets due to normal wear or year ,means decrease in value of assets like a machine due to its daily use
Refers to wear and tear of capital machinery
what is meant by currency depreciation?
an envelope curve is also call an umbrella curve it is any curve that is enclosed by being tangen t to a series of other curves
fall in the value of currency vis-a-vis any other currency usually $ due to marker forces is called currency depreciation. it is different from devaluation where in value of currency is deliberately reduced to improve BoT
depreciation in its broad sense means loss in the value of fixed capital say a tractor due to i) normal wear and tear ii) normal rate of accidental damage iii) expected absolescence to meet this, Depereciation Reserve Fund is created it is calculated by firms on the basis of their experience.
what is green revolution ?discuss the achievement of green revolution in India
Sweety Reply
green revolution is the third revolution of agricultural refers to a set of research and development of technology transfer initiative occuring between 1930s and the late 1960s that increased agricultural is called green revolution
the green revolution happened because to improve the agricultural sector towards adopting mordern methods and improvement of agricultural equipments
green revolution means new innovation for high yielding varieties seeds towards economic development in agriculture sector. started in 1966, it's achievement increase per productive of all crops ie rice, wheat,maiz,etc...mainly 131 million food grain in 1978-79 produced in india
Punjab and haryana was the first 2 states which have been successfully adopted hyv's and due to this adoption these two states find more successfull in india and it contributed though our national income and also to GDP growth this helps in development of our nation.
what calculation for demand and supply
Amoo Reply
what is nationalisation
Awuni Reply
it is a process of converting private assets into public assets by undertaking the control of government or state authority
so true
what are some the things that may lead to nationalisation
Over exploring of customers by the private individuals Also to make the nationalised organisation social reliable and accessible by all
feeling of one's is called nationalisation. unity among them self .
anything which is widely acceptable as a medium of exchange
Shabana Reply
money ,currency
Hello plz,what is the full mean of tertiary?
al Reply
tertiary also called philoshper
tertiary means third..for example primary sector ,secondary and tertiary sector... means three number..
ru 9ice tnk
your most welcome.
what is money
what is a bank
a financial institution which holds money for its clients ,which collect deposit and lend money at interest and trades generally in money...
what is bankers draft ?kindly explain with example .
money "anything which is widely acceptable as a medium of exchange"
yes u ryt #shabana
difference between cost and price
Shallow definition
cost"the value of input that is the amount of money which is used to produce a good or service . price"an amount of money which has to b paid to buy something.
Tertiary is an adjective(pre position) for stages or levels and refers to "top, final, full term ." ; Advanced.
bank draft is a type of cheque which a person buy for to pay someone who is not willing to accept a personal cheque .
tertiary sector is an providing any kind of services.
primary sector is 'agriculture', secondary sector is ' industrial sector ,and the tertiary sector is ,' service sector' ,
subana are you understand now the meaning of bank draft?
what is golden- diamond paradox
what is occupational structure
Madhu Reply
occupational structure refers to the distribution of occupation on the basis of educational ,socoial ,income level in a society or economy
no that is not a exact meaning
than what is exact meaning
It refers to also the what is the average income of the person
what is deficit
Obiajunwa Reply
deficit = expenses > revenue
yeah expenses over revenue results in deficit
What is What is Equilibrium
Bright Reply
from business point of view it is that point where business revanu are equal to its expenses.
in economy where demand is equal to supply is called equalibrium
Equilibrium in economics is where quantity demanded is equal to quantity supplied
what are the objectives of devaluation
how the government solve the problem of scarcity
how government solve the problem of scarcity
by deciding the output limit for every industry and providing resources to these industries according to output limit .the problem can be solved
and by controlling the activity of production like as a mixed economy this problem can be solved
by proper planning to cater the needs of people, demand & supply process may prove helpful. and by imposing heavy import duty on the product to shift the demand towards available alternative sources.
changing the methods of production, and tax system
In problems of scarcity government should adopt a plan or state budget, form a long term policy , deal with corruption , mobilise resources ,systems and monitor.
by doing various plans or scheme and providing various kind of free or in less price to the needy people
Plx anyone explain bankers draft by giving example.

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Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
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