What happens to prices, output and employment when productivity increases?

a. all three rise

b. prices rise, output and employment fall

c. prices fall, output and employment rises

d. only prices rise

I am having trouble thinking this one through, help me understand why you chose the answer you choose. Thanks in advance.

Top 1 Answers

A few days ago

aCeRBic

Favorite Answer

Use your noggin, i’ll answer since no one else will. If you make pancakes and your level of production of pancakes rises (productivity rises) your output of pancakes has to increase, right? If you have a factory that produces pancakes and to increase output you have to find more help, right? So employment rises. If there are more pancakes in the market, assuming demand stays level, then prices fall since there’s more product. So answer is C.

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What happens to prices, output and employment when productivity increases?

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