ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -By reducing unit labor cost increases, productivity growth reduces inflationary pressure on prices. Hourly wages can rise faster than prices, increasing buying power for workers and consumers.

Detailed explanation-2: -The level of productivity is the most fundamental and important factor determining the standard of living. Raising it allows people to get what they want faster or get more in the same amount of time. Supply rises with productivity, which decreases real prices and increases real wages.

Detailed explanation-3: -Productivity gains have historically led to gains in real income, lower inflation and increased corporate profitability. A company that is increasing output with the same number of hours worked will likely be more profitable, which means that it can raise wages without passing that cost on to customers.

Detailed explanation-4: -Productivity improvement, then, means getting more done – more output – with the same amount of input. Even better, the best improvements can allow your business to increase productivity while decreasing cost.

Detailed explanation-5: -If productivity increases, the total costs of a firm fall, and the firm is expected to increase workers’ wages. The effect of wage increases can be offset on profits.