Can you determine the net effect of increases in both workers' wages and workers' productivity? How could you look at the economy and determine which (if either) of the two effects dominates the other, ceteris paribus?

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Business

Jessie Gillespie

11 September, 18:59

Can you determine the net effect of increases in both workers' wages and workers' productivity? How could you look at the economy and determine which (if either) of the two effects dominates the other, ceteris paribus?

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Answers (1)

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Erik Daugherty · Answer 1

Increase in wages of workers shift the curve to the left whereas the increase in workers productivity shift the curve to the right.

Explanation:

Aggregate supply (AS) is the aggregate supply of services and goods which is produced within the economy at a stated price level in the given period.

So, if increase the wages of the worker means increase in the input prices which lead to the shift of the AS to the left side and increase in the productivity of the workers lead to shift of AS towards right side.

The increase in wages would cause the AS curve to shift leftward and the increase in workers productivity would cause AS curve to shift rightward. So, basically it depends or grounded on which factor outweighs another leaving the net effect in-determinant.