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Question 1
What are the sources of human capital? What are sources of labor productivity? Discuss some specific examples.
Answer:
Sources of human capital
The human capital is defined as the human resource that is working towards the benefits of the economy or the organisation. The productivity of human resource increases with the good skills, training and education. The productivity of human resources can be improved by investing in human resource through providing training and education which directly impacts on the revenue generation of the company. There are various sources of human capital, and they are explained below:
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Health: The healthy human resource contributes higher by regular attendance as compared to the unhealthy employee. The healthy human resource works with more energy and motivation that directly contributes towards the organizational goals (Murphy et al., 2014).
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Education: The education helps to improve the productivity of employee by increasing the knowledge and understanding of human resource which directly impact's on the contribution towards the human resource.
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Training: The training helps to improve the efficiency level of human resource which enables them to work in an effective manner. It helps to gain the skills required to perform the particular job which directly contributes towards the higher productivity.
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Migration: The human resource migrated from one place to another in order to show their capabilities and talent which contributes towards the organizational goals.
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Information: The increase in awareness about the labour market from various source of information shows that the value of labours is high.
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Sources of labour productivity
The labour productivity is defined as the amount of goods and services produced by the labour within the particular time period. The sources of labour productivity are explained below:
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Investment in labour: The investment in labour by increasing their salary helps to increase the productivity of labour which is a motivation in monetary terms. It enhances the productivity by satisfying the monetary needs of labour which motivates them to work in a most efficient and effective manner. For example, Increase the salary of an employee by $500 which increase the productivity by $20,000.
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Accountability: The increase in accountability of employee helps to increase the productivity of labour by answering the status of every individual task. The accountability forces the labour to take strategic decision and actions to improve the productivity within the particular time period.
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Investment in assets: The investment in various assets such as a laptop, machinery and others which help to increase the productivity of labour by providing machinery to work in a most efficient and effective manner (Iommi et al., 2014). For example implementation of information technology in the organisation improves the labour productivity by reducing the time for calculating and developing manual reports.
Question 2
What is the law of diminishing returns? Give an example of what the law of diminishing returns implies.
Answer:
Law of diminishing returns
The law of diminishing returns states that in the process of productivity if one factor is adding while other factors are constant that at some point the returns will start diminishing. It does not imply that adding one factor leads to diminishing the returns because it is called as negative returns (Real et al., 2013). It means that the marginal product of a variable input starts decreasing by adding more variable inputs. For example, the employer is employing the labour more and more which leads to falling the marginal product of labour over the particular period of time. For example, the farmer is having two acres of land and other sources of factor production include fertilizers, labour, water, and seeds. In the short run, the fixed factor is land, and other factors are variable. Now the farmer will employ labour which enables to improve the productivity, but after some period of time, the marginal product of labour starts falling due to constant fixed factor in the short run and indivisibility of the factor of production. Then the farmer will maximise its productivity by utilising the fixed assets then the at some point the productivity starts decreasing due to increasing in labour which creates disturbance in each other's work.
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Place Your OrderQuestion 3
What happens when the government raises taxes and uses revenue to engage in spending?
Answer:
Issues raised by government expansion
When the government raised taxes and uses the revenue to engage in spending’s then the disposable income of an individual decrease due to paying the high tax within the particular time period. The consumption level of an individual also decreases due to a decrease in the level of spendings. Then the aggregate demand of goods and services in the economy reduces which also reduces the profit margin of organizations. Then the increase in tax revenue by the government increase the government spending's (Imam et al., 2014). Thus the aggregate demand increases in the economy. The situation of balancing the budget of the government arises in which the government spending's equal to the tax revenue of government. The multiplier of a balanced budget of the government is one.
References
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Murphy, K. M., & Topel, R. H. (2014). Human Capital Investment, Inequality and Growth. Journal of Labor Economics. Working Paper, (253), 39.
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Iommi, M. (2014). Sources of Labor Productivity Growth in the EU and the US: the Role of Intangible and ICT Capital (No. 14111). Dipartimento di Economia e Finanza, LUISS Guido Carli.
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Real, L. A. (2013). On Uncertainty and the Law of Diminishing Returns in. Limits to action: The allocation of individual behavior, 37.
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Imam, P. A., & Jacobs, D. (2014). Effect of corruption on tax revenues in the Middle East. Review of Middle East Economics and Finance Rev. Middle East Econ. Fin., 10(1), 1-24.
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