Instructions Visit the US Department of Labors Bureau of Lab

Instructions: Visit the US Department of Labor’s Bureau of Labor Statistics at http://www.bls.gov/bls/newsrels.htm (Links to an external site.)Links to an external site..

Question 2: Would the change in productivity impact the demand or supply curve for a product? Explain.

Solution

Question 2

Productivity indicates the production potential.

Change in productivity impacts the production potential and thereby the production of the product being undertaken by a firm.

Change in production impacts the supply.

So, in a way, change in productivity impacts the supply curve for a product.

Increase in productivity leads to increase in supply and thus shifts the supply curve to the right.

On the other hand, decrease in productivity leads to decrease in supply and thus shifts the supply curve to the left.