ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Capital deepening is a situation where the capital per worker is increasing in the economy. This is also referred to as increase in the capital intensity. Capital deepening is often measured by the rate of change in capital stock per labour hour.

Detailed explanation-2: -Capital deepening refers to an increase in the proportion of the capital stock to the number of labor hours worked. Movements in this ratio are closely tied to movements in labor productivity, all other things held equal. An increase in capital per hour (or capital deepening) leads to an increase in labor productivity.

Detailed explanation-3: -Capital deepening increases the marginal product of labor – i.e., it makes labor more productive (because there are now more units of capital per worker). Capital deepening typically increases output through technological improvements (such as a faster copier) that enable higher output per worker.

Detailed explanation-4: -Capital Deepening is the process in which the amount of capital per unit of labor is increased by investing in technological advancements, thereby increasing the labor productivity, overall production, and reduced cost of production, which in turn leads to an increase in contribution margin.

Detailed explanation-5: -The capital-labour ratio (K/L) can measure the capital intensity of a firm. Typically, over time, firms tend to have a higher capital-labour ratio as they seek to gain productivity improvements from investment in capital and automating the production process.