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A wage-price spiral occurs when rising wages lead to increased production costs, prompting businesses to raise prices to maintain profit margins. As prices increase, workers demand higher wages to keep up with the cost of living, perpetuating the cycle. This can lead to sustained inflation, where inflation expectations become entrenched, making it challenging for policymakers to stabilize the economy. Ultimately, if unchecked, it can result in reduced purchasing power and economic instability.
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What causes a wage price spiral?
A wage-price spiral occurs when rising wages lead to higher production costs, prompting businesses to increase prices for goods and services. As prices rise, workers demand higher wages to maintain their purchasing power, creating a cycle of wage increases followed by price hikes. This can be fueled by factors such as strong labor demand, inflationary expectations, or supply chain disruptions. The result is a continuous loop that can contribute to sustained inflation within the economy.
An effective minimum wage can lead to?
the law of supply states that price and quantity supplied are
Low unemployment rates in the country employers offer higher wage to meet their higher payroll costs and maintain profits they charge consumers more for goods and services what are the consequences?
a wage price spiral of ever-increasing prices
What determines the demand for labors?
causes a movement along the MRP curve: -wage rate causes a shift of the MRP curve: -price of capital -changes in productivity -changes in the price of the firm's product -demand for the product
What factors determine the demand for labor?
causes a movement along the MRP curve: -wage rate causes a shift of the MRP curve: -price of capital -changes in productivity -changes in the price of the firm's product -demand for the product
What is a common criticism that management has made of labor unions?
Excessive wage demands lead to price hikes that result in inflation
What is the relationship between price floor and minimum wage?
A price floor is a government-imposed lower limit on the price of a good or service, while minimum wage is a specific type of price floor set for labor. By establishing a minimum wage, the government ensures that workers receive a baseline level of compensation for their labor. If the minimum wage is set above the equilibrium wage, it can lead to a surplus of labor, meaning higher unemployment, as employers may hire fewer workers at the higher wage. Thus, both concepts aim to protect certain economic interests but can have unintended consequences in the labor market.
Is minimum wage a price floor?
A minimum wage could be considered a price floor because it sets a wage floor on the price of labour. Since labour is an important factor of production, and price reflects the cost of production, then higher wages correspond to higher prices if there are no productivity gains.
A decrease in the wage rate causes?
A decrease in the wage rate typically results in reduced labor costs for businesses, which can lead to higher profits or lower prices for consumers. However, it may also lead to lower income for workers and potentially reduced consumer spending in the broader economy.
The minimum wage is an example of?
The minimum wage is an excellent example of a price floor
What is a Wage Neg?
wage neg is wage negotiable. it means that you can call someone who is putting something on sale and ask them about the price.
How do you distinguish between money wage and real wage?
Real Wage = Money Wage / Price Index Real wage measures purchasing power, that is what an hour's labor can buy.
