How will an increase in labour productivity affect equilibrium in the labour market?
A)The supply of labour will increase and the equilibrium wage and quantity of labour will increase.
B)The demand for jobs will increase and the equilibrium wage and quantity of labour will increase.
C)The demand for labour will increase and the equilibrium wage and quantity of labour will increase.
D)The demand for labour will decrease because fewer workers will be needed to produce the same output.The equilibrium wage and quantity of labour will decrease.

Question

Quizplus · Accepted Answer

An increase in labour productivity means that each worker can produce more output in a given amount of time. This increases the demand for labour, as firms will want to hire more workers to produce more goods and services. As a result, the equilibrium wage and quantity of labour will increase, as there will be more demand for labour but the same supply of workers. Option A could be a possibility if the increase in productivity leads to an increase in the number of workers available, but this is not specified in the question. Option B is incorrect because it suggests that workers are in demand rather than labour, which is not the case. Option D is also incorrect because an increase in labour productivity means that more output can be produced with fewer workers.

How Will an Increase in Labour Productivity Affect Equilibrium in the Labour