Final answer:
The equity theory states that employees are happy and satisfied when they perceive their compensation as equal to that of others in similar situations.
Step-by-step explanation:
The subject of the question is Business. According to the equity theory, employees are happy and satisfied when they feel that their compensation—given their performance—is equal to that of other employees in the firm or other individuals in similar situations. The equity theory is a concept in the field of organizational behavior and human resource management that focuses on the relationship between an individual's perception of fairness and their motivation and satisfaction in the workplace. This theory suggests that employees compare their own outcomes (such as pay and recognition) to the outcomes of others, and if they perceive inequality in these outcomes, it can lead to feelings of dissatisfaction and demotivation.