In the fourteenth century it is estimated that deaths resulting from the bubonic plague reduced the population by about a third. Assuming diminishing returns, the decrease in population should have

a. increased productivity and real GDP per person.

b. increased productivity but decreased real GDP per person.

c. increased real GDP per person, but decreased productivity.

d. decreased productivity and real GDP per person.

Question

Edward Kemp

Business

18 April, 11:37

In the fourteenth century it is estimated that deaths resulting from the bubonic plague reduced the population by about a third. Assuming diminishing returns, the decrease in population should have

a. increased productivity and real GDP per person.

b. increased productivity but decreased real GDP per person.

c. increased real GDP per person, but decreased productivity.

d. decreased productivity and real GDP per person.

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Answers (1)

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Hazel Best · Answer 1

d. decreased productivity and real GDP per person.

Explanation:

The trick is in the question itself. The diminishing return is a microeconomics term. It states that removing a portion of a factor from a factory could increase the production in that factory.

But reducing the personnel in all the factories is a macroeconomics issue and it halves the economy. Just imagine tomorrow 1,000,000 people is fired. That would be bad not good.

The diminishing returns did not apply in nearly mass-extinction event. It is a theory which applies under the assumption the rest of the economic factors remains unchanged.

In this case, it wasn't just labor who decreases. It also decrease the capital and entrepreneur, as people with ideas and their capital was lost and knowledge die as well. The land used for agriculture also halved.

The numbers on the economies at the time reflect a huge loss in the life conditions, not an increase.

This would be like the 1,500 sandwich study. If you need to do all the work alone this decrease in the factor available quantity is that much that decrease the productivity per person It do not increase it.