Question
Which of the following occurs when labour productivity rises ?
Answer: Option A
Answer: (a)
As labour productivity increases, the production function shifts up and simultaneously the labour demand curve shifts out and right. At a given real wage, more workers are hired and output increases.
Similarly, as the capital stock increases, the production function shifts up and simultaneously the labour demand curve shifts out and right.
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Answer: (a)
As labour productivity increases, the production function shifts up and simultaneously the labour demand curve shifts out and right. At a given real wage, more workers are hired and output increases.
Similarly, as the capital stock increases, the production function shifts up and simultaneously the labour demand curve shifts out and right.
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