Question

The prices of products and the wages paid to labor each change over time. Describe how prices and wages have changed over time. For your description of wage changes, include a description of how nominal and real wages change

Answer 1

Wage paid to labour for a particular period of time called wage rate. An increase in the the wage rate increases the production costs of firms , this will lead toincreases the selling prices.The price of the product increases the consumers demand will be less.Which means less output will be produced and sold. That means less labour will be used. The price of product and wage rate or wages paid to labou directly with each other.so whatever change occured in price or wage changes affect each other.

A Nominal wage, is known as money wage,which is the money paid to employee by employer as wage called nominal wage which is not adjusted for inflation. HOwever the real wage is the puchasing power of the wage which is adjusted to inflation.Nominal wage is always increase less than the inlation rate but the real wage or purchasing power will be low.