Answer :
Final answer:
The capital-labor ratio decreases over time when investment per worker is less than saving per worker. It's further influenced by the declining marginal product of labor due to fixed capital and increasing productivity which reduces capital needed per worker.
Explanation:
The capital-labor ratio will tend to decrease over time when investment per worker is less than saving per worker. If investment per worker fails to match or exceed saving per worker, then less capital is being committed to bolster workforce efforts. This results in a lower capital-labor ratio.
The marginal product of labor is also a key aspect here. The marginal product of labor refers to the additional output a firm can produce by hiring one additional unit of labor, ceteris paribus (all other things being equal). In this situation, if the firm has fixed capital, the marginal product of labor will decline as more workers are hired, leading to a decrease in the capital-labor ratio.
Lastly, productivity growth contributes to this. Productivity refers to how much output can be produced with a given quantity of labor. If productivity grows such that the same quantity of labor can produce more output, the capital-labor ratio can decrease as less capital is needed per worker.
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