Question:
Why can Productivity make Firms more Inclined to Demand more?
Author: eric_galvaoAnswer:
-Productivity Increases can mean more Output is made per Worker. This in turn lowers Unit Labour Costs (as its spread out.) Therefore more is Made with the Same Cost (if wages don’t Increase.) -Even if wages increase, the Demand for Labour is unaffected as long as the % of Wage Rise = Productivity. The Unit Labour Cost would still be the Same.
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