Labour intensive technique would get chosen ina) Labour surplus econom...
The labor surplus economy model has as its basic premise the inability of unskilled agricultural labor markets to clear in countries with high man/land ratios. In such situations, the marginal product of laboris likely to fall below a bargaining wage, related to the average rather than the marginal product.
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Labour intensive technique would get chosen ina) Labour surplus econom...
Labour intensive techniques are those production techniques that require a significant amount of labor input compared to other factors of production such as capital or technology. These techniques are typically characterized by a high ratio of labor to capital.
In a labor surplus economy, there is an excess supply of labor relative to the demand for labor. This means that there are more workers available than there are jobs available. In such an economy, labor is usually abundant and cheap. As a result, firms tend to favor labor-intensive techniques of production to take advantage of the low labor costs. This is because using labor-intensive techniques allows firms to employ a larger number of workers at a lower cost, thus maximizing their output and profits.
In a labor surplus economy, the following factors contribute to the preference for labor-intensive techniques:
1. Cheap labor: With a surplus of labor, the wages of workers are typically low. This makes labor a relatively cheap factor of production compared to capital. By employing more workers, firms can take advantage of the low labor costs and increase their production levels.
2. Limited access to capital: In economies with a labor surplus, there is often limited access to capital due to the low level of investment and financial resources. As a result, firms may not have the necessary capital to invest in advanced technology or machinery. Labor-intensive techniques, which require less capital investment, are therefore more feasible in such economies.
3. Low productivity levels: In labor surplus economies, the level of education and skill development among the workforce may be relatively low. This can result in lower productivity levels compared to developed economies. Using labor-intensive techniques allows firms to make the most of the available labor resources, even with lower productivity levels.
It is important to note that the preference for labor-intensive techniques in a labor surplus economy is a result of the specific economic conditions prevailing in such an economy. In economies with a labor shortage or higher levels of capital, firms may choose to adopt capital-intensive techniques that rely more on advanced technology and machinery.
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