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Q 23.

Principles of Economics
Found in: Page 496

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Short Answer

Labor Productivity and Economic Growth outlined the logic of how increased productivity is associated with increased wages. Detail a situation where this is not the case and explain why it is not.

Yes, this can happen too.

See the step by step solution

Step by Step Solution

Step 1. Definition

Economic growth is defined as the expansion in the production of goods and services in contrast from one period to another period of time.

Step 2. Explanation

Normally when the labor productivity increases their wages also increase. And in turn, increased wages increase their standard of living, now they have more disposable income which they can use. This happened because the worker is producing more so he or she gets more wages for their production.

Step 3. Conclusion

But sometimes exactly the opposite happens. Sometimes an increase in labor production doesn’t increase the wages of the workers because when they produce more this will increase the output in the economy. that’s why the supply also increases and because of this sellers also slashed the costs of the goods and services and this will lead to a reduction in the wages of the workers.

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