Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It decreases the derived demand for labor.
B
It has no effect on the derived demand for labor.
C
It increases the derived demand for labor.
D
It renders labor demand perfectly inelastic.
Understanding the Answer
Let's break down why this is correct
Answer
When the marginal productivity of labor increases, it means that each worker is producing more goods or services than before. This higher productivity makes it more valuable for companies to hire more workers because they can earn more money from the extra output. As a result, businesses will demand more labor to take advantage of this increased productivity. For example, if a factory finds a way to make its workers more efficient, it may need to hire additional workers to keep up with the higher production levels. Thus, an increase in the marginal productivity of labor leads to greater derived demand for labor in a competitive market.
Detailed Explanation
When workers become more productive, they create more value for the company. Other options are incorrect because Some might think that more productivity means fewer workers are needed; It's a common mistake to think productivity changes don't matter.
Key Concepts
Marginal productivity
Labor demand shifts.
Topic
Derived Demand for Labor
Difficulty
medium level question
Cognitive Level
understand
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