Explain the difference between the nominal wage and the real wage. Using a wage setting curve and a price setting curve illustrate how the real wage determines the equilibrium level of employment in the economy. (b) On a new diagram use a wage setting curve and a price setting curve to illustrate the change to the equilibrium level of employment if there is a reduction in the degree of competition faced by firms. Clearly state what will occur to the real wage and the level of unemployment
(a) Explain the difference between the nominal wage and the real wage. Using a wage setting curve and a
(b) On a new diagram use a wage setting curve and a price setting curve to illustrate the change to the equilibrium level of employment if there is a reduction in the degree of competition faced by firms. Clearly state what will occur to the real wage and the level of
Economics as a subject deals with the allocation of scarce resources among humans with unlimited wants. For production, raw materials are used as inputs and processes through machinery using physical labour to convert into finished products. This is then taken to the market and buyers and sellers come to an exchange agreement at a particular price.
As economies emerged, goods and services were produced that required machinery and labour. With time humans learnt how to build new machines, their technicalities improved and they learned various ways they could take part in the production process. Economics as a subject evolved and with it, economists learned various ways to distinguish the production, allocation and behaviour of individuals that would help in optimizing allocation.
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