Chapter 3 - Witte

• Supply Side Model = Production Function – (constant returns to scale)

• Factor Prices

Chapter 3 - Witte

• Firms = Profit Maximizers

• Diminishing Marginal Returns, MPK, MPL

Chapter 3 - Witte

• Real Economic Profit

• Euler’s Theorem

• Labor Productivity

Chapter 3 - Witte

• Cobb-Douglas Production Function

Chapter 3 - Witte

• Demand Side Economics: Y = C + I + G + NX

• C = A + MPC(Y-T)

• I = I(r)

Chapter 3 - Witte

• G = G(?)

• Budget Balance

• Y =

Chapter 3 - Witte

• National Savings = S

• Market for Loanable Funds