when total factor productivity
increases it means the efficiency of production has been
increased.the ability and skills of the economic drivers have also
been increased and they are more competent and have better
capability concerned with the
production.
- IMPACT ON
AGGREGATE CONSUMPTION-due to increased productivity
the efficiency concerned with the production would enhance
therefore better quality product would be
available at a lower price and thus people would demand more due to
decrease in price and increased quality of the product.the firm
would be able to sell the additional production due to decrease in
per unit cost of production due to better and innovative
technology.
- IMPACT ON
EMPLOYMENT-when the demand of the product would
increase then there would be need of additional production,and
this would require additional
requirement of men-power,therefore the demand of skilled labor
would be increased and thus the economy can achieve full employment
level.
- IMPACT ON REAL
WAGES-assuming the wage rate same suppose $50 per day earlier the
consumable goods were available at $35 and thus only $15 were left
with the person but now the same goods are available for $25 this
means that the real wage of the person has been increased by
$25.therefore,increased productivity would also leads to increase
the real wage in the economy.