What the firms could adjust workers wages

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Question: Due to market fluctuations can cause an increase or decrease in GDP, changing the price of consumer goods. During these cycles of either recessionary or inflationary gaps, the price can change much more rapidly than that of what the firms could adjust workers' wages and goods price point. This is due to price wage rigidity caused by normal wage contracts, meaning that your wage is stuck at a pre-agreed upon price point for an agreed upon time. This is an example of a sticky price. There are also other factors that cause firms issues with rapid response to market fluctuations including the cost associated with printing new catalogs, also some firms enter long term agreements that allow for stability in regarding to their sale prices for an agreed upon amount.

Reference no: EM133526879

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