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.

            Physical capital is also commonly referred to as just Capital.

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.