Unit 2 Part 2 Technology and Incentives in Economics

A set of vocabulary flashcards based on the key concepts covered in the lecture about technology and incentives in economics.

Production function

A relationship that tells us how much output will be produced given the amount of inputs used.

Factors of Production

The inputs needed for the production process, which include labor, machines, and energy.

Constant returns to scale

A situation where doubling all inputs results in a doubling of output.

Fixed-proportions technology

A technology where inputs are used in a fixed ratio.

Innovation rents

The additional profit a firm earns when adopting a new technology.

Average product of labor (APL)

Output per number of workers, calculated as Output/N.

Iso-cost line

A line that shows all combinations of inputs that cost the same amount.

Endogenous variables

Variables whose values are determined by relationships built into the economic model.

Exogenous variables

Variables whose values are determined outside the economic model.

Ceteris paribus

A Latin phrase meaning 'holding all else equal'; used in economic modeling.