Firms benefit in many ways from increased productivity. What is one of the ways consumers benefit when firms increase their productivity?
Cheaper prices?
More jobs
http://www.heritage.org/research/reports/2013/07/productivity-and...
thank you
http://www.heritage.org/research/reports/2013/07/productivity-and-compensation-growing-together
When firms increase their productivity, consumers can benefit in several ways. One of the ways consumers benefit is through lower prices.
Here's an explanation of how you can understand the relationship between increased productivity and lower prices:
1. Productivity and Costs: Increased productivity often leads to lower production costs for firms. When firms can produce more output using the same amount of resources (such as labor, capital, or technology), their production costs decrease. This can be due to various factors, such as better technology, improved production processes, or more efficient use of resources.
2. Cost Savings and Pricing: Lower production costs allow firms to reduce the prices of their products or services. Firms can pass on some of the cost savings to consumers, making their offerings more affordable. Lower prices can attract more customers, increase sales, and enable consumers to purchase goods or services they may not have been able to afford before.
3. Increased Purchasing Power: When prices decrease, consumers' purchasing power increases. With the same amount of money, consumers can buy more goods or services, or they can choose to save the extra money. This additional purchasing power enhances consumer welfare and can improve overall living standards.
4. Competitive Pressure: Increased productivity in one firm can also create a competitive pressure on other firms to improve their own productivity. This competition among firms to be more efficient and productive can lead to a broader trend of lower prices across the market, benefiting consumers even if they do not directly purchase from the most productive firm.
To summarize, increased productivity in firms can result in lower prices for consumers. This occurs as firms reduce their production costs and pass on the cost savings to consumers, thereby increasing consumers' purchasing power and improving overall welfare.