Suppose that, prior to a technological change (innovation) in an industry, at existing Factor prices, it takes 30 units of capital and 100 units of labor to produce 500 units of Good X. (Assume that capital and labor are the only two factors of production.) After the Innovation, it takes 25 units of capital and 50 units of labor to produce 500 units of good X (at the same factor prices as before the innovation). In this situation, the technological
Change would be classified as a __________ technological change.

Question

Quizplus · Accepted Answer

The technological change is considered labor-saving since it now takes fewer units of labor to produce the same amount of output. The reduction in required units of capital is irrelevant for the classification of the technological change.

Suppose That, Prior to a Technological Change (Innovation) in an Industry