📚 Learning Guide
Impact of Technology on Labor Demand
easy

If a company experiences an increase in the demand for its product due to technological advancements, what is the most likely underlying cause for this increase in labor demand?

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Choose the Best Answer

A

The productivity per worker has increased, leading to higher marginal revenue product.

B

The company has decided to lower wages to attract more workers.

C

There is a decrease in the number of competitors in the market.

D

The technology has made the product less appealing to consumers.

Understanding the Answer

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Answer

When a company sees an increase in demand for its product because of new technology, it often needs more workers to keep up with that demand. This is because the technology may allow the company to produce more products faster and at a lower cost, making their goods more appealing to customers. As a result, the company might hire more employees to operate the new machinery, manage production processes, or handle increased sales. For example, if a car manufacturer uses robots to build cars more efficiently, they might need additional workers to oversee the robots and ensure everything runs smoothly. Thus, the underlying cause of increased labor demand is the need for more human resources to support and complement the technological advancements.

Detailed Explanation

When technology improves, workers can produce more in less time. Other options are incorrect because Some might think lowering wages will attract workers; It's a common belief that fewer competitors means more demand.

Key Concepts

Impact of Technology on Labor Demand
Marginal Revenue Product
Perfectly Competitive Labor Market
Topic

Impact of Technology on Labor Demand

Difficulty

easy level question

Cognitive Level

understand

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