Production & Growth- Group C

List the determinants of  a country's productivity and give an example of each.

• Physical Capital per Worker- the stock of equipment and structures that are used to produce goods and services.
• Example: The machines that enable a jewelry manufacturer to make their rings.
• Human Capital per Worker- the knowledge and skills that workers acquire through education, training and experience.
• Example: Investment in education,training, health insurance, teachers and libraries.
• Natural Resources per Worker- the inputs into the production of goods and services that are provided by nature, such as land, rivers and mineral deposits.
• Example: trees, sunshine, soil, water, plants, animals, oil, coal, and metals.
• Technological Knowledge- society's understanding of the best ways to produce goods and services.
• Common knowledge- Henry Ford introduced assembly lines in auto manufacturing, but other companies in other industries followed suit.
• Proprietary- Apple develops a new phone and patents it, and then has exclusive rights to produce that phone for a certain period of time.

Two hundred years ago, 80% of the U.S. labor force worked in the farming industry. Today, farming accounts for only 2% of U.S. jobs. The U.S. population certainly has not decreased over the last 200 years. Using production function concept(s) discussed in the text, explain why you think this change has occurred.

• In present America, farming only accounts for 2% of the U.S labor force instead of 80% due to technological knowledge and physical. As farming skills and tools advanced throughout the 200 year span, it required less labor and increased productivity for the population. The invention of large tractors, seeders, harvesters, and irrigation devices heavily contributed to the farming industry shift. As a result, people left the farming industry and gained the opportunity to receive higher education and specialize in other areas of the labor force. 

You and four friends become shipwrecked on the deserted island "Hav-a-lot." This island has many natural resources like fresh water, fish, edible fruit and edible wildlife. Given what you have learned so far in this class, discuss how you, as the island leader, would organize this new society to maximize production, and thus, maximize your chances of surviving. Be sure to use economic terms discussed in this course in your answer.


As the island leader under this strenuous circumstance, I would first locate the fresh water because it is the most critical natural resource for our survival. The task of gathering fish, edible fruit and wildlife will be divided and assigned to the individual with the comparative advantage. One person will gather fruit as it requires minimal skill to produce large quantities. Next, one person will hunt for wildlife and another will gather fish as well as collect water because both tasks involve connection to the water supply. Lastly, two will use trees to build a place of shelter because increased labor is required in this area. Natural resources located on the island such as trees and minerals will be used to create tools for hunting, fishing, cooking food, building shelter and containing water supply. As labor is divided, all five of us on the island will reap the benefits from each daily gathering by sharing and trading with each other. This system will produce the maximum productivity from each worker, because the division of labor increases the quantity of inputs. As all members of the island have reassurance that areas involving food, water and shelter will be provided, they will contribute at the highest level of production.