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Derived Demand for Labor
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If a new technology significantly increases the productivity of workers in the manufacturing sector, what is the most likely effect on the demand for labor in that sector?

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Choose the Best Answer

A

The demand for labor will increase because firms can produce more goods.

B

The demand for labor will decrease because fewer workers are needed to produce the same amount of goods.

C

The demand for labor will remain unchanged as technology does not affect labor needs.

D

The demand for labor will fluctuate unpredictably based on consumer preferences.

Understanding the Answer

Let's break down why this is correct

Answer

When a new technology increases productivity in manufacturing, it usually means that workers can produce more goods in less time. This higher productivity can lead to greater profits for companies, which may encourage them to expand their operations. As companies grow, they often need more workers to keep up with the increased demand for products. For example, if a factory can make twice as many toys using new machines, it might hire more workers to meet the rising orders. Therefore, the demand for labor in that sector is likely to increase as companies seek to benefit from the technology.

Detailed Explanation

When technology helps workers produce more, companies need fewer workers to make the same amount of products. Other options are incorrect because Some might think more goods mean more workers are needed; It's a common belief that technology doesn't change how many workers are needed.

Key Concepts

Derived Demand for Labor
Productivity
Labor Market Dynamics
Topic

Derived Demand for Labor

Difficulty

medium level question

Cognitive Level

understand

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