Explain the real wage with example, Macroeconomics

Assignment Help:

Explain the Real wage with example

Consider following scenario. You work full time and during January 2008 you make 2000 euro after tax. A specific basket of services and goods costs 100 euro in January that means that your salary would buy you 20 such baskets.

In February, you receive a 10% wage increase and you have 2200 euro after tax. Does this imply that you can buy 10% more baskets - which is 22 - in February? Well, not essentially.

The number of baskets which you can buy in February relies on the possible changes in prices as well. If price of a basket increases by 3% to 103 euro your 2200 will buy you 2200/103 = 21.36 baskets of 7% more than in January. Albeit your wage has increased by 10%, you can only increase your consumption of baskets by 7%. We say that real wage has increased by 7%.

 


Related Discussions:- Explain the real wage with example

Pros and cons of var, Since their inception, VAR models have been at the ce...

Since their inception, VAR models have been at the centre of many controversies associated with econometric modelling. The recurring criticism throughout history is due to the mode

Trends in current account, Trends in current account: A  glance at  th...

Trends in current account: A  glance at  the net invisible  account suggests that its  ever-  rising  trend  from 2000-01 did not  only support  the  massive trade deficit but

Crowding out is associated, Crowding out is associated with: A. an increase...

Crowding out is associated with: A. an increase in business investment resulting from an increase in government borrowing and higher interest rates. B. an increase in private savin

Assigment question, Ask question #Minimum 100 wordsThe following is the inf...

Ask question #Minimum 100 wordsThe following is the information from the national income accounts for a hypothetical country: GDP

Liberalisation and mode of entry, Liberalisation and Mode of Entry: Va...

Liberalisation and Mode of Entry: Various new forms of FDI flows have also emerged. Besides mergers and  joint ventures, transactional relationships are emerging such  as lice

Name two strategies is most likely to lead to development, Explain which of...

Explain which of the two strategies is most likely to lead to development. Empirically, it seems rather evident that export-orientation has been more successful than import-sub

Trade liberalisation under wto, TRADE LIBERALISATION UNDER WTO: In  th...

TRADE LIBERALISATION UNDER WTO: In  the Uruguay Round negotiations, India agreed to reduce tariff on a  large number of  commodities and  remove quantitative restrictions (QRs

Calculate constant vector, A particle at position I with velocity i has a...

A particle at position I with velocity i has acceleration w given by i = w x ( w x i ) where ? is a constant vector. Show by using the vector triple product and calcula

Wages, what is a wage? and the difference between real and nominal wages gi...

what is a wage? and the difference between real and nominal wages giving examples?

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd