Definition
- Productivity
- Productivity is output per worker: when the same workers produce more, the cost of each unit falls and SRAS shifts right, and potential output rises too.
Example
Can you think of an example of productivity?
Supermarkets bring in self-checkouts and warehouses install stock-picking robots. Each worker handles more goods an hour, so the cost of each unit falls and SRAS shifts right.
Test yourself
Can you name the five things that shift short-run aggregate supply?