2. Real wages, nominal wages, and unexpected changes in the price level Sharon currently earns a wage of $12.00 per hour; in other words, the amount of her paycheck each week is $12.00 per hour times the number of hours she works. Suppose the price of orange juice is $2.00 per gallon; in this case, Sharon's wage, in terms of the amount of orange juice she can buy with her paycheck, is gallons of orange juice per hour. When workers and firms negotiate compensation packages, they have expectations about the price level (and changes in the price level) and agree on wage with those expectations in mind. If the price level turns out to be higher than expected, a worker's than both the worker and employer expected when they agreed to the wage. wage is Sharon and her employer both expected inflation to be 4% between 2012 and 2013, so they agreed, in a two-year contract, that she would earn $12.00 per hour in 2012 and $12.48 per hour in 2013. However, suppose inflation between 2012 and 2013 actually turned out to be 7%, not 4%. For example, suppose the price of orange juice rose from $2.00 per gallon to $2.14 per gallon. This means that between 2012 and 2013, Sharon's and her real wage by approximately

2. Real wages, nominal wages, and unexpected changes in the price level Sharon currently earns a wage of $12.00 per hour; in other words, the amount of her paycheck each week is $12.00 per hour times the number of hours she works. Suppose the price of orange juice is $2.00 per gallon; in this case, Sharon's wage, in terms of the amount of orange juice she can buy with her paycheck, is gallons of orange juice per hour. When workers and firms negotiate compensation packages, they have expectations about the price level (and changes in the price level) and agree on wage with those expectations in mind. If the price level turns out to be higher than expected, a worker's than both the worker and employer expected when they agreed to the wage. wage is Sharon and her employer both expected inflation to be 4% between 2012 and 2013, so they agreed, in a two-year contract, that she would earn $12.00 per hour in 2012 and $12.48 per hour in 2013. However, suppose inflation between 2012 and 2013 actually turned out to be 7%, not 4%. For example, suppose the price of orange juice rose from $2.00 per gallon to $2.14 per gallon. This means that between 2012 and 2013, Sharon's and her real wage by approximately

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter16: Labor Markets

Section: Chapter Questions

Problem 16.1P

See similar textbooks

Similar questions

25 of 38 Jill works as a computer specialist for a local manufacturing firm. If Jill receives a raise in her hourly wage and decides she would like to increase her hours of work, we know that: O A. her income effect is greater than her substitution effect. O B. her substitution effect is greater than her income effect. O C. her income and substitution effect reinforce each other. O D. her income and substitution effects are equal. Unsure
How can we measure the opportunity cost of leisure? The opportunity cost of leisure is O A. economic discrimination. B. the marginal product of labor. c. a compensating differential. O D. the wage rate. O E. pure rent. The substitution effect of a wage increase O A. causes a worker to supply a larger quantity of labor, and the income effect causes a worker to supply a smaller quantity of labor. B. causes a worker to supply a larger quantity of leisure, but the income effect causes a worker to supply a smaller quantity of leisure. C. causes a worker to supply the same quantity of labor, and the income effect causes a worker to supply a smaller quantity of leisure. D. causes a worker to supply a smaller quantity of labor, and the income effect causes a worker to supply a larger quantity of labor. Why is the supply curve of labor usually upward sloping? O A. As the wage increases, the opportunity cost of labor increases, causing individuals to devote more time to working. B. As the wage…
7. Consider the following individual's Supply curve of labor (). The wage is W and the quantity of labor supplied is L (note that this could be counted as hours per week). $W W W S L L Lo Notice that over the wage range Wo to W₁, it is positively sloped. There are two effects in play here. One is the higher 'implicit price of leisure' (higher wage than before is forgone for any hour of leisure taken... substitution effect). The other is the increase in 'affordability of leisure' (due to higher earnings than before for a given amount of work effort ... income effect). Which of the following statements is accurate (assuming that leisure is a normal good)? O The 'implicit price of leisure' effect dominates and leads the worker to offer more labor service at a higher wage. O The 'affordability of leisure' effect dominates and leads the worker to offer more labor service at a higher wage. O The 'affordability of leisure' effect dominates and leads the worker to offer less labor service at a…
Which of the following statements is false? o A. The difference between the substitution effect and income effect of a wage increase does not depend on the shape of the indifference curves. OB. If the wages rise, it is possible to observe both the substitution and income effects. O C. A reservation wage is the wage below which a person will not work in the labour market. O D. Other things equal, people who are working longer hours will exhibit higher income effects when wage rates change.
how do i find the change in the wage rate when im not given a wage but have: sales revenue = 80 payments to labor = 80 payment to capital = 40 and the change in price = 25% in the Sarong industry and sales revenue = 80 payments to labor = 30 payments to capital = 60 and the change in price = 0% in the beer industry
Refer to Table 3.1. Suppose that you have a house that you rent out. If you keep the lawn maintained, you can charge a higher monthly rent for the house. If your hourly wage rises from $25 to $35, what happens to the number of hours per week you spend maintaining the lawn? Hours Per Week Maintaining Lawn 0 4 8 12 16 20 They don't change. They fall by 12 hours OThey fall by 4 hours They fall by 8 hours. Table 3.1 Benefit (Additional Monthly Rent) $0.00 $150.00 $260.00 $330.00 $390.00 $450.00
Suppose the money wage rate rises from $40.00 to $46.74 an hour and consumer prices rises by 14 percent. What would be the effect in the labor market? We would expect people to try to find a job and employed people to want to work hours. O A. fewer; shorter B. fewer; longer C. the same number of; the same number of D. more; longer The would A. quantity of labor supplied; increase O B. supply of labor; increase O C. supply of labor; decrease O D. quantity of labor supplied; decrease Click to select your answer. MacBook Air DII DD こ. 吕0 F9 F7 F8 F6 esc F4 F5 F2 F3 F1 & 2$ ! 5 6 8 9 1 2 3 4
Figure 18b This figure below shows the labor market for automobile workers. The curve labeled S is the labor supply curve, and the curves labeled D1 and D2 are the labor demand curves. On the horizontal axis, L represents the quantity of labor in the market. 0 S D₁ What is measured along the vertical axis on the graph? O a. the wage paid to automobile workers O b. time spent by workers producing automobiles O c. the quantity of automobiles produced O d. the price of automobiles L
LO LL 50 45 40 20 15 WAGE (Dollars per hour) 6. Plotting the supply of labor In Philadelphia, 180 people are willing to work an hour as hostesses if the wage is $20 per hour. For each additional $5 that the wage rises above $20, an additional 45 people are willing to work an hour. For wages of $20, $25, $30, $35, and $40 per hour, plot the daily labor supply curve for hostesses on the following graph. Supply 35 25 5. 06 135 180 225 270 315 405 450 LABOR (Number of workers) What is one explanation for why this labor supply curve is upward sloping? MacBook Pro #3 24 2. 4. R M B. N
QUESTION 2o WAGE EMPLOYMENT In the labor market depicted in figure, an increase in oil prices OA shifts labor demand from L to L O B. produces no change in either the labor supply or demand curve. OC. shifts labor demand from L O D.shifts labor supply from L to L 79 We R. Y. LU TV
Which of the following events would cause a rightward shift in the demand for labour? O A. A decrease in the wage rate. O B. A decrease in the price of capital which causes the substitution effect to outweigh the scale effect for labour. O C. None of the listed options O D. A decrease in the demand for a product.
21 Refer to the figure below and assume that price is fixed at $36,000 and that Buzzer Auto needs five workers for every automobile produced. $36,000 DH DL 770 920 Cars per week 1220 If demand is DMand Buzzer wants to perfectly match its output and sales, how many cars will Buzzer produce? How many workers will it hire? If, instead, demand unexpectedly falls from DM to DL, how many fewer cars will Buzzer sell? How many fewer workers will it need if it decides to match production to these lower sales? Price