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

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

Way they do at home, 1. Should each person behave in the workplace the way ...

1. Should each person behave in the workplace the way they do at home? Or should each person have a separate set of ethics for each part of their life? 2. What if you are the bo

Number of gallons of paint, The number of gallons of paint that Home Depot ...

The number of gallons of paint that Home Depot sells in a given day is normally distributed with a mean of 150 gallons and a standard deviation of 35 gallons (I realize that the di

Energy infrastructure, Energy Infrastructure: Electricity is one of th...

Energy Infrastructure: Electricity is one of the main determinants of the quality of life. In India, the power sector has not kept pace with the growth in demand resulting in

Determination of all the endogenous variables, Q. Determination of all the ...

Q. Determination of all the endogenous variables? Determination of all the endogenous variables in the AS-AD model Determination of P and Y: Prices and

What is independent monetary policy, What is independent monetary policy ...

What is independent monetary policy Advantages: First, in a freely-floating exchange rate, the exchange rate must move down or up to correct a payments imbalance. Second, monet

solow model, critically explain solow model of economic growt

critically explain solow model of economic growth

How does outsourcing affect the economy, In principle, outsourcing makes th...

In principle, outsourcing makes things a little inexpensive and enhance profitability. Though, some things require to be done 'in house'. For example, some employers (largely) outs

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