Quiz no.

3
QUESTIONS

Direction: Answer the following questions comprehensively. You can make

research in the Internet to help you answer the questions concisely.

1. Why is Labor considered an important factor of production?

-Labor is a productive factor that is active. Production is commenced by this factor. Land and
capital are passive factors because they cannot initiate production on their own. In order to be
productive themselves, they require labor, the active factor of production.

2. Why is the exertion of effort not considered as labor?

-Labor always refers to some sort of mental or physical effort made with the intention of making
money. Any effort or exertion made for pleasure or social good is not regarded as labor. Animal or
mechanical labor is not considered to be labor.

3. Why is Labor said to be Perishable?

-Labor is a perishable resource in nature. This simply implies that it needs to have enough
storage space because labor cannot be stored. A worker cannot store their work for later use. As a
result, we may draw the conclusion that labor is a very perishable input of production.

4. What kind of labor is supplied by the Entrepreneur?

-Production is primarily influenced by four factors. The three main production inputs are land,
labor, and capital. In order to run a business and make a profit, the entrepreneur must combine
these components in the right ratio.

5. What basis is used when households make decisions on how much time should be allotted
to market and nonmarket activities?
-Households will logically allocate some time for nonmarket activities, according to the
substitution effect. The tendency is for them to switch some hours over to market activity if
wage rates go up and they believe the returns they receive from engaging in nonmarket
activities are reduced.

6. What is the effect of Wages on the quantity of labor supplied?

-The substitution effect of a wage increase increases the amount of labor supplied, while the
income effect of a wage increase decreases the amount supplied.

7. On what factor does the demand for labor depend?

-The main factor influencing the demand for labor is productivity. Depending on its marginal
revenue productivity, labor is in demand. Up until the wage rate is equal to marginal revenue
productivity, an employer will continue to employ an increasing number of labor units.

8. What is the effect of High Unemployment?

 -High unemployment is a sign that the economy is underperforming and is inefficient, which will
result in lower output and incomes. Because they are unable to buy as many items, the unemployed
will also contribute to lower output and spending. Increased unemployment may have a negative
multiplier effect.

9. What is the effect of High Employment?

-Higher consumer spending results from higher employee wages, which benefits other companies
that depend on consumer sales to stay open and pay suppliers. These effects can be achieved on a
small scale and the amount of money moving around the market by adding more employees to your
small business.

10. When does underemployment occur?

-Underemployment happens when a person doesn't work full time or accepts a position that
doesn't correspond to their actual skills and financial requirements. That is, they don't use all of
their knowledge and training in their job or only work part-time.