Not all Lay-offs are Good for Society

WHY ARE THERE LAY-OFFS?

• Productive Efficiency
  • Improved Productive efficiency allows business to produce the SAME AMOUNT OF OUTPUT with fewer workers
  • These lay-offs are GOOD for society because they reduce scarcity (more products are produced)

   

• Allocative Efficiency
  • Allocative efficiency means the economy uses its limited resourses to produce what people want
  • Resources are not wasted producing products that people do not want
  • Some lay-offs occur in industries that were producing products that people no longer wanted
  • These lay-offs are GOOD for society because they reduce scarcity (more products are produced)

   

• Recession
  • Some lay-offs are the result of an economic recession when unemployment rises and people buy fewer products
  • These lay-offs are NOT GOOD for society because they result in MORE SCARCITY (fewer products are produced)