KEY CONCEPTS

Factors of production

Production function

Constant returns to scale

Factor prices

Competitive firm

Profit

Marginal product of labor (MPL)

Diminishing marginal product

Real wage

Marginal product of capital (MPK)

Real rental price of capital

Economic profit versus accounting profit

Cobb–Douglas production function

Disposable income

Consumption function

Marginal propensity to consume (MPC)

Interest rate

Nominal interest rate

Real interest rate

National saving (saving)

Private saving

Public saving

Loanable funds

Crowding out