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Unemployment represents a pool of underutilized resource. Should firms relocate to areas of high unemployment?

Unemployment represents a pool of underutilized resource. Should firms relocate to areas of high unemployment?

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Answer #1

Yes,firm's should relocate to areas to high unemployment.It would only utilise the underutilized pool but also help firms hire workers at a very low wage rate.We know that there is an inverse relationship between unemployment rate and wage rate.So,lower wage rate would decrease the marginal cost of production,which would increase the supply of the firms.Increase in supply would increase the overall level of output which would stimulate the demand in the long run.

So,firms should relocate to areas of high unemployment.

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