Question

What happens to the production of both goods in a country when there is an increase in labor? Which theorem will you apply here?

Answer 1

                        The production of goods in a nation is always influenced by various factors of production of which labour is an important factor of production. The demand for labour in the market and the labour wages are some of the important factors that contributes to the productivity of an economy. The Labour Theory of Value was one of the earliest theories that was used to explain the value of a commodity in a market with respect to the number of labour hours required to produce the same. The Theory of production in the market also talks about the requirement of each factor of production for better production in the market.

                        With the understanding of the above theories, we can say that as there is an increase in the labour force in the market, the following events would occur

· An increase in the labour force would result in an increase in the overall productivity of the economy

· As the number of labourers increases, there would be competition among them which would mean that much of the labour force would have to work at lower wages so as to remain in the labour force of the economy and hence the efficiency of labour may decline in the linger run as the wages would not have the power to satisfy the labour

· As labour satisfaction gets reduced, it would lead to lower quality production even at times where there is an increase in the productivity.

· The reverse would happen at times of lesser availability as it would lead to more demand for labour and the labour wages would get increased resulting in increased efficiency of production

Thus, all of the above are effects of an increase in the labour force of an economy which can be described with the help of theories stated above that contributes to the change.