Chapter 26 Definitions: Production and Growth

Productivity

The quantity of goods and services produced from each unit of labor input.

Physical capital

The stock of equipment and structures used to produce goods and services.

Human capital

The knowledge and skills that workers acquire through education, training, and experience.

Natural Resources

The inputs into production that are provided by nature, such as land, rivers, and mineral deposits.

Technological knowledge

Society’s understanding of the best ways to produce goods and services.

Production function

Describes the relationship between the quantity of inputs used in production and the quantity of output from production.

Diminishing returns

The property whereby the benefit from an extra unit of an input declines as the quantity of the input increases.

Catch-up effect

The property whereby countries that start off poor tend to grow more rapidly than countries that start off rich.