Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It increases the demand for labor as firms need more workers to operate new technology.
B
It decreases the demand for labor as firms can replace workers with machines.
C
It has no effect on labor demand as technology does not impact worker requirements.
D
It leads to an equal demand for labor and machines.
Understanding the Answer
Let's break down why this is correct
Answer
The substitution effect happens when a change in technology allows companies to produce goods more efficiently, often using fewer workers. When technology improves, it can make machines or tools more effective than human labor, so businesses might decide to use these machines instead of hiring more workers. This means the demand for labor may decrease because employers are substituting machines for workers. For example, if a factory introduces a new robot that can assemble products faster than ten employees, the factory may need fewer workers, reducing labor demand. Therefore, while technological advancements can create new jobs in some areas, they can also lead to a decrease in labor demand in others due to the substitution effect.
Detailed Explanation
When technology improves, machines can do tasks that workers used to do. Other options are incorrect because Some might think new technology means more workers are needed; It's a common belief that technology doesn't change how many workers are needed.
Key Concepts
Labor market
Substitution effect
Industry demand
Topic
Derived Demand for Labor
Difficulty
hard level question
Cognitive Level
understand
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