embodied tax credit:

diminishing returns: a situation in which successive increases in the use of an input, holding other inputs constant, will eventually cause a decline in the additional production derived from one more unit of that input.

subsistence line: a line representing the minimum amount of production the population needs to survive or subsist.

Malthusian equilibrium: a situation in which production equals the subsistence level of output because population adjusts based on consumption of food.

iron law of wages: the (untrue) prediction that wages will always tend to equal the subsistence level.

labor alone is not enough to account for the economic growth that the world has experienced for the last 150 years. increases in capital and technology must be taken into account for economic models to work.

Y=F(L,K,T) GDP is a function of labor capital and technology

technology: anything that raises the amount that can be produced with a given level of capital and labor.

technological change: improvements in technology over time.

invention: a discovery of new knowledge

innovation: application new knowledge in a way that creates new products or significantly changed older ones.

diffusion: the spreading of an innovation throughout the economy

when an innovation is created the owner of the innovation often not fully rewarded for the improvements he has brought to society. the situation that often results is a positive externality in which an underproduction of technology occurs because the producers who pay the costs of innovations do not fully experience the benefits of their inventions.

labor saving technological change: a technological innovation that reduces the amount of labor needed to produce a given amount of output with a given amount of capital.

capital saving technological change: a technological innovation that reduces the amount of capital needed to produce a given amount output with a given amount of labor.

division of labor: dividing work into different tasks with groups of workers specializing in each task.

learning by doing: a situation in which workers become more proficient by doing a particular task many times.

human capital: the accumulated education and training workers receive that increases productivity.

patent: a grant giving an inventor exclusive rights to use an invention for 17 years.

nonrivalry: the situation in which more people can consume a good without reducing the amount available for others to consume.

nonexcludability: the situation in which no one can be prevented from consuming a good.

intellectual property laws: laws that protect ownership rights over ideas and inventions; includes patent laws, copyright laws, and trademark laws.

growth accounting formula: an equation that states that the growth rate of real GDP per hour of work equals capital's share of income time the growth rate of capital per hour of work plus the growth rate of technology.

Growth rate of real GDP per hour of work= 1/3 (growth rate of capital per hour of work) + (growth rate of technology)

or growth rate of technology growth GDP/hr. work -- (1/3) growth capital/ hr. work

research and development: (R & D) activities designed to further scientific knowledge and develop new products.