Question

Macroeconomic data for the country of XYZ for the years 2014 and 2015 are given as

	2014	2015
Output	12,000 tons of carrots	20,000 tons of carrots
Unemployed	100 workers	50 workers
Unemployment rate	5%	2%
Population	4000 people	4400 people

Assume that XYZ produces only carrots.

What is the growth rate of average labour productivity between 2014 and 2015?

(Show your calculation

Question 31 options:

	a) Around 39.31%
	b) Around 19.31%
	c) Around 29.31%
	d) None of the above

Answer 1

Labour is one of the four factors of production. Wage is the reward of labour. It involves both physical and mental work.

Labour productivity is nothing but the quantity of output produced per unit labour. Generally, labour is measured in employment hours.

The formula to calculate labour productivity is,

Labour productivity = Total output / Number of workers

To find out the growth rate of average labour productivity, let us go through the following equation

The growth rate of average labour productivity = (Labour productivity in the current year - Labour productivity in the previous year) / Labour productivity in the previous year X 100

The correct answer is option d) None of the above

Now, let us check out the question.

STEP - 1: Calculation of the number of workers in the country XYZ in 2014 & 2015

2014

Given that the unemployment rate = 5%

Unemployment rate = No. of unemployed / labour force

5% = 100 / Labour force

Therefore, labour force ( No. of workers) = (100 / 5) x 100

= 2000

2015

Using the same formula,

No.of workers = (50/2) x 100

= 2500

(Note: The population does not indicate labour force. The population comprises of labour force and dependents.)

STEP - 2: Calculation of average labour productivity

Labour productivity = Total output / Number of workers

2014, Labour productivity = 12000 tons / 2000

= 6 tons of carrot

2015, Labour productivity = 20000 tons / 2500

= 8 tons of carrot

STEP -3: Calculation of growth rate of average labour productivity

The growth rate of average labour productivity = ( Labour productivity in the current year - Labour productivity in the previous year) / Labour productivity in the previous year X 100

= (8 tons of carrot - 6 tons of carrot) / 6 tons of carrot X 100

= ( 2 tons of carrot / 6 tons of carrot ) X 100

= 1/3 X 100

= 33.33%

Therefore, the correct answer is option d) None of the above