Question

In disguised unemployment, what is the impact on total output when extra workers are removed from employment?

Options

• Total output increases due to better efficiency

• Total output decreases significantly

• Total output remains unchanged because more workers are employed than actually required

• Total output becomes negative due to labour shortage

Answer 1

Disguised unemployment occurs when more workers are employed than actually required to produce a given level of output. The key characteristic is that removing the extra workers does not reduce output, indicating that these workers are redundant. This type of unemployment is particularly common in agriculture and informal sectors where surplus labour exists but contributes minimally to production.