What is

growth?

WHAT IS GROWTH?

There are different models represented by different economists. One of the best model is represented by Robert Solow which is called ROBERT SOLOW'S GROWTH MODEL.

What
this model explains ?

The Solow's growth model represents the five basic steps like
Macro-production function. Gdp equation. Savings function. Changes in capital. Changes in workforce.

Solow's model allows us for the substitution between CAPITAL and LABOUR.

Human CAPITAL

Y=f(K ,L)

Aggregate Production Function: It is assumed to be characterized by constant

return to scale so for specific time period we add t Yt=f(Kt, ALt).

Y= Production. K= Human and physical capital. L= Labour A= Productivity per labour.

CONSTANT RETURN TO SCALE:

It means, increase in the input will increase the output

by the same level. The positive increase in output is represented as :
yY=f (yK , yL).

y is the positive addition .

When y is A positive real number by

mathematical operations putting the value of y as 1/L then

Yx1/L=f(kx1/L, Lx1/L)

Y/L=f(K/L, 1)

When there is substitution between

labour and capital. So labour finishes only capital is left.

This model states that output per

worker is a function that depends on the amount of capital per worker.

More the
capital with which a worker has to work, the more output he can produce.

It
demonstrate that the increase in the saving rate, shifts the function up.

CONCLUSION:

This model states that the output per worker

is totally dependent on the amount of capital per worker.