
Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 6 The Economics of Labor Markets Chapter 18 of 36 The Markets for the Factors of Production Section 12 of 20 Consider three factors that cause the Figure 3 demand curve for labor to shift. -1- Unit Price -2- Technological Progress -3 - Supply of Other Factors … -2- Technological Progress Between 1960 and 2000 the amount of output a typical U.S. worker produced in an hour rose by 2.4 times. The most important reason for the increase is technological progress. Technological progress raises the marginal product of labor, with a new machine each worker can produce more. This increases the demand for labor, which means the demand curve for labor shifts to the right per Figure 3a. … Technological progress can also decrease labor demand. A new machine in a factory often results in fewer workers needed to produce the amount of product demanded from the company. In this case the demand curve for labor shifts t...