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Ed22
- 3. Quiz - Solow Growth Model 1.What are the three lines of logic in the Solow Growth Model? 2. Is Output constant, increasing, or diminishing in the Solow Model? 3.What is savings a function of? 4.What is depreciation a function of?
- 4. Solow Growth Model Y = √K S = I = s√K D = dk Capital K Y Output Steady State D = S = I Consumption
- 5. K = 100 s = .30 or 30% d = .025 or 2.5% Y = ? S = ? D = ? Consumption = ? Quiz
- 6. Solow Growth Model Y = √K S = I = s√K D = dk Capital K Y Output 100 10 3 2.5
- 7. Solow Growth Model Y = √K S = I = s√K D = dk Capital K Y Output 144 12 3.60 Consumption 8.40
- 8. Increase Savings Increase Productivity Two Ways to Grow
- 9. Solow Growth Model Raise Savings Rate 30% 40% Capital K Y Output
- 10. Solow Growth Model income is a function of K add a productivity factor to K A = technology Y = √K Y = A√K
- 11. Solow Growth Model Y = A1√K Y = A2√K Capital K Y Output
- 16. Four Types of Goods Private Goods Public Goods Common Resources Club Goods
- 17. Some goods do not have prices How much should we produce? Government policy
- 18. Private Goods Goods that are excludable and rival in consumption. Can exclude others If I consume, you cannot
- 19. Excludable Can people be prevented from using the good? Yes No
- 20. Rivalry in Consumption Can one person’s use of a good reduce others use? Can two people consume at the same time without reducing?
- 21. Exclude others When I consume it diminishes
- 22. Public Goods Goods that are neither excludable nor rival in consumption. Cannot exclude Everyone can consume without reducing amount
- 24. Free Rider a person who receives a benefit but does not pay for it
- 25. National Defense
- 27. Common Resources Goods that rival in consumption but are not excludable Cannot exclude others If I consume, you cannot
- 28. Common Resource Drink as fast as possible before it runs out
- 29. Private Good Each person has his own cup
- 30. Which method will incentivize people to not waste the resource? Share one cup Each person gets their own cup
- 37. Tragedy of the Commons If everyone owns it, no one owns it Privatize the commons
- 42. Property Rights Reduce contention Create wealth
- 43. Club Goods Goods that are excludable but not rival in consumption Can exclude others Everyone can consume without reducing amount
- 44. Rival in Consumption? Yes No Yes No Excludable? Private Goods Common Resources Club Goods Public Goods Snickers Bar Car Pizza Satellite TV Paintings Fireworks National DefenseFish in Ocean Air Is it reduced when one person consumes? Can people be prevented from consuming?
- 45. Every generation has underestimated the potential for finding new ideas…Possibilities do not add up.They multiply A + B A x B AB
- 47. A candle loses nothing by lighting another candle - John Heller
- 49. Economics of Ideas Profits motivate Share without losing value Benefit but not pay Government encourage Larger market, more incentive
- 50. Why are apps so cheap? Large fixed cost Zero marginal cost Huge market
- 51. 2.2 billion $1 million $1 sell 2 million $2 million Profit $1 million
- 52. Research and Development $11.5 billion a year
- 54. Economics of Ideas Imitators drive innovators out of the market Patents 20 year monopoly
- 56. Incentives dignity property rights honest government political stability rule of law
- 57. Increase the number of ideas per hour? ideas for making it easier to create more ideas