In an economy where all employment is wage employment, what will happen to the share of wages in value added if the productivity of labour increases by 10 percent while the annual average real wage goes up by 8 percent?
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Factor markets and income distribution has come up 55 times in 6 exams since 2006.
This question is on Distribution theory: factor shares, Euler's theorem and rent, part of Factor markets and income distribution in Microeconomics.
How output is divided among factors, and when payments to factors exactly exhaust output.
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Question from the JNU SSS 2017 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.