Questions tagged [aggregate-production]
The aggregate-production tag has no usage guidance.
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Derive and Decompose The Aggregate Elasticity of Substitution in CES Economy
The paper is Oberfield & Raval 2021.
Consumers have standard Dixit-Stiglitz preferences consuming the bundle
$$Y= \left(\sum_{i \in I} D_{i}^{\frac{1}{\varepsilon}} Y_{i}^{\frac{\varepsilon-1}{\...
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A hypothetical question on neutrality of money
Let's assume that we start with an economy producing two goods, A and B, with each priced $100. Each good is weighted using the same quantity, so CPI equals 100. Nominal wage is also 100 dollars. An ...
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How to solve this aggregate production problem?
Consider a continuum of firms indexed by $a\in [0,1]$ and that $a$ is uniformaly distributed. a firm of type $a$ has a production set $Y^n$ as depicted in the figure below. note that good 1 is used as ...
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Aggregation of the closure property of a production set
Consider an economy with finitely many goods $I$ and factors $F$. For each good $i$, let $Y_i \subset \mathbb R^I \times \mathbb R^F_{\geq 0}$ denote a production set for $i$. Assume each $Y_i$ has ...
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Aggregation in macroeconomic model with expanding product varieties
The final good is produced by a competitive industry combining a set of intermediate
products, $i ∈ [0, N_t ]$ , using a CES aggregator:
\begin{equation}
Y= \left( \int_{0}^{N_t} y(i)^{\frac{\sigma -1}...
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Is usage of white colored paper so widespread due to economic factors?
Why is white paper so popular? Is it so because it's cheaper or because it's a widely accepted standard for color?
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How is employment related to aggregate demand and aggregate supply?
When we talk about excess or deficient aggregate demand , how does employment suddenly comes ?
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Convert UN Data Table 2.3 to USD (Output, gross value added, and fixed assets by industries at current prices, ISIC Rev. 3)
How (un) reasonable is to take the ratio of GDPs in local currency over GDPs in USD to convert http://data.un.org/Data.aspx?d=SNA&f=group_code%3A203 to current USD?
I have looked for a version un ...
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Why did the Cambridge Capital Controversy have no impact on economic modelling?
Every now and again I find myself looking into the Cambridge Capital Controversy in terms of debate around general equilibrium modelling often walking out more confused than I have before doing such a ...
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Help with Macroeconomics Question: IS-LM Model [closed]
I know this is supposed to be a simple question, but I need to check the answers for it and as it was a past exam question I do not have the results for it.If anyone can help out, that would be ...
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Aggregate production function and returns to scale
I have following Aggregate production function -
$$ Ak_1^\alpha l_1^{1-\alpha} + Ak_2^\alpha l_2^{1-\alpha}$$
Individually each part exhibit constant returns to scale but as an Aggregate function ...
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CES v. Leontief Aggregator in Production
Consider a production process with two distinct capital types such that there is a capital aggregator. You could view $k_v$ as a more versatile capital (e.g. can be converted into many different ...
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Why doesn't demand affect output in the long run?
In Mankiw's Macroeconomics, he states that, in the short run, an economy's output depends both on its supply and demand for goods and services, because of price stickiness. In the long run, when ...
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In microeconomics : is this the contradiction in the atomicity of firms ?
Let $p$ be the market demand. It is a function of the market production $Q$. Let $q_i$ be the production of firm $i$.
Reading Steve Keen (in Debunking Economics, chapter II) quoting George Stigler, I ...
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What is the elasticity of Substitution of the function X = (K+alpha)(L+beta)
For this function, the marginal rate of technical substitution is given by (K+alpha)/(L+beta). Generally we solve for K/L in terms of MRTS of two factors. Then differentiate to solve for elasticity of ...
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Does aggregate CRS imply firm-level CRS?
Suppose that a production set $Y \subset \mathbb R^I$ has the following two properties:
Constant returns to scale: $\forall y \in Y, \alpha \geq 0$, we have $\alpha y \in Y$.
Separability: For some $\...
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preference convexity and existence of equilbria
Consider a production economy with $L$ goods, a single consumer and a single producer whose production set are given by $Y\subset R^L$. Question is to find the existence condition of equilibria of ...
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Can Autonomous Consumption be Greater than Income of individual?
Autonomous consumption is done either through past savings or by borrowing money or selling asset to have minimum consumption in order to survive.
So can autonomous consumption be greater than our ...
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Net exports term in aggregate expenditure [duplicate]
This might be a basic question, which I don't yet understand. The aggregate expenditure (i.e., in my understanding, the total amount of inflation factored (i.e. real) money spent in the economy by its ...
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CES aggregator for intermediates with heterogeneous productivity
I'm following Atkeson, Burstein (2019 JPE), and cannot understand the aggregation result.
There is measure $M(z)$ of firms with productivity $z$, with production function
$$
y(z) = z k(z)^\alpha l(z)^...
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Effects of increased income over short and long run in AD-AS equilibrium model
I've read in a few places that increased income/wages shifts SRAS to the left, which makes sense because firms' costs are increasing to pay for them. My textbook says that there's no effect on ...
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How would increase labor productivity lead to improved living standards of people in an economy?
I would like to know more about the mechanisms through which higher labor productivity would translate into higher living standards for a population in a given economy.
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Why doesn't AD curve self-correct to higher price level in LR?
In textbooks it is usually taught that once actual price level is higher than expected, short-run aggregate supply will eventually shift up so that new expected price level is closer to the actual ...
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Profits and Aggregate Supply
I feel like this is quite a stupid question, but I can't wrap my head around it. Why do suppliers make less of a good as profits drop? Intuitively, shouldn't they make more of the good in order to ...
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Log differentiation of aggregate production function [closed]
Suppose we have an aggregate production function $Y = A F(K, L)$. I'm following some slides which then states that we if log differentiate we get the following:
$\frac{\dot{Y}}{Y} = \frac{\dot{A}}{A} +...
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What is the exact difference between Income Effect and Wealth Effect?
I’m aware that in basic economics class one of the explanations for the downward-sloping Aggregate Demand Curve is the wealth effect or Pigou effect, which means that as price level goes down, your ...
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Why doesn't Aggregate Demand mean National Income whereas Aggregate supply is equal to national income?
Aggregate Demand is Basically
$$
AD = C + I + G + X - M
$$
Is not this national income Through Expenditure Method ?
Then why don't we treat AD equal to National Income ?
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GDP with Intermediate Production
I'm a total noob. Please be kind. :)
GDP is only calculated using "end products". This seems terribly difficult to me. For example, is a truck an end product or a method for production? If I'm ...
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Why don't we draw National Income Curve(45 deg. line) simultaneously with graph for Saving Function?
When we talk about Consumption Function , we draw the 45 degree line of Income or Aggregate supply curve simultaneously.
But while graphing saving function , we don't show Income curve (45 deg. line) ...
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Short run Aggregate supply curve is horizontal or positively sloped?
I want to understand the adjustment process from Very short run production decision to Short run production decision to Long run production decision. As far as I've understood: consider an increase in ...
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Economic interpretation of a CES production function
I am following a paper where a production function of this type is used.
$$Y=\left [\beta K^{- \rho}+\alpha \eta \left (\frac{K}{L} \right )^{-c(1+\rho)}L^{- \rho} \right ]^{-1/\rho}$$
It is a ...
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Supply elasticity on a piece-wise linear supply function
The supply elasticity at a point is the willingness to produce more or less after the price has changed (due to whatever reason?).
$$\mu_{Q,P}=\frac{\partial Q_S/Q_S}{\partial P/P}=\frac{\partial Q_S}...
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What is the difference between aggregate supply and GDP?
Usually when I read online, I see the following repeated frequently: aggregate demand is equal to GDP. I understand that aggregate expenditures is the aggregate demand at a particular price level, and ...
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How is Aggregate Supply(Willing) equal to National Income(Actual)?
Acc. to definition of Aggregate Supply
It is the total value of final goods and services that the producers are willing to supply in country .
Definition of National Income
It is the value of ...
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Macroeconomics: effect of technology/workforce in the short run
My friends and I have homework and we can't come to a consensus on these questions on how they affect aggregate demand, aggregate supply, and equilibrium:
Foreign investors building machineries with ...
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Is there an economic theory that explains what happens when a market is saturated with a precious resource?
The theoretical situation is this. What if a record breaking amount of platinum were discovered. What would happen to the economies that use, store, and/or produce platinum?
I would like to apply ...
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Linearization of VES production funtions
I know that the linearization of a CES (constant elasticity of substitution) funtion is a bit complicated. There is even an R package dedicated just for that - the econometric estimation and ...
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Estimating aggregate production function with sharp decline during a crisis period
How could one go about estimating a long term aggregate production function, when there is a sharp decline in both factor inputs (i.e. investment and hours worked) and output for a few consecutive ...
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Complementarity in CES Production Function
I'm reading Fisher (1997, Journal of Monetary Economics). From the intermediate goods produced ($Y_t$), the final goods firm allocates into consumption ($C_t$), business capital investment ($I_{b,t}$),...
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Will SRAS curve definitely shift if LRAS curve shifts?
From what I know, a shift in LRAS is generally caused by a change in maximum productive capacity of an economy, which affects the full-employment output level. Such change in maximum productive ...
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Macroeconomics: Aggregate Demand, Equilibrium Dynamics and Expenditure Multipliers
I am having a hard time with the following economic questions (See attached). Here is my approach:
Note about the curves: The graph below depicts an economy where a decline in aggregate demand has ...
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How do environmental deregulations push an economy inside its Production Possibility Frontier and make it inefficient?
I read in a textbook that if we plot a PPF with automobile manufacturing and clean air as the axes and the company pollutes the state making clean air (a public good) scarce, automobile manufacturing ...
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Difference between short run and long run supply curves?
We know that in short run supply curve is horizontal which means that prices remain rigid while quantity of supply adjusts according to demand. However, in long run this reverses. I know about some ...
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Aggregating CRS Production Functions
If thera are two firms and both of them have constant returns to scale production function. Will the aggregate/industry production function still be the sum of individual production functions. How ...
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