MACRO ECON 6
6th Edition
ISBN: 9780357689820
Author: MCEACHERN
Publisher: CENGAGE L
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Question
Chapter 10, Problem 2P
To determine
Real wage rate and nominal wage rate.
Concept Introduction:
Real wage rate: Inflation is the rate at which the commonprice level for goods and services are increasing.
Nominal wage rate: Nominal wage is the money wage received by the labor. It is not adjusted to inflation.
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1. After the reopening of borders with mainland China following the COVID-19 lockdown, residents
living near the border now have the option to shop for food on either side. In Hong Kong, the cost
of food is at its listed price, while across the border in mainland China, the price is only half that
of Hong Kong's. A recent report indicates a decline in food sales in Hong Kong post-reopening.
**
Diagrams need not be to scale; Focus on accurately representing the relevant concepts
and relationships rather than the exact proportions.
(a) Using a diagram, explain why Hong Kong's food sales might have dropped after the border
reopening. Assume that consumers are indifferent between purchasing food in Hong Kong or
mainland China, and therefore, their indifference curves have a slope of one like below.
Additionally, consider that there are no transport costs and the daily food budget for consumers
is identical whether they shop in Hong Kong or mainland China. I
3.
14
(b) In response to the…
Chapter 10 Solutions
MACRO ECON 6
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