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True, False, or Uncertain: Increases in productivity lead to lower wages because firms don’t need as...

True, False, or Uncertain:

Increases in productivity lead to lower wages because firms don’t need as many workers as before to produce the same number of goods.

Explain Why this is or is not true

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Answer #1

The statement is false

When there is an increase in the productivity of workers, marginal product of labour increases. This will be increasing the demand of labour and therefore the demand curve will be shifting to the right in the labour market. As a result there will be an increase in the wages and an increase in the number of labourers demanded and supplied.

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