ADVANCE MACROECONOMICS

Advance Macroeconomics

Advance Macroeconomics

Exercise 6

Contrary to the opinion of some experts and executives who believe that the increase in wages is always a rise in prices and inflation, we think it may well be non-inflationary nature.

In a normal market economy, increase the wage bill - it really make to sales and secured money, adequate, so Actually created value. Consequently, the increase in the wage fund should be based on the increase in the volume of goods. To the extent that this increase in the volume of goods is due to growth in labor productivity, and it may cause the increase in average wages. If this growth products are all things being equal (at the same time and foundation work intensity) by increasing the number of employees, the wage bill increases without an increase in the average.

There is another, non-inflationary as well, but less harmonious way of increasing the wage bill - the redistribution of income by reducing the proportion (size) of business income or any other part of the profit in the revenue or value added created in the company and, consequently, increasing the payroll.

In general, the share of wages in income the company, its revenue is an important element of the organization pay. The new, "smart", innovative economy - a highly efficient, high-performance economy. Production efficiency, productivity, we simply indecent low. Source protect the economy and society of the poor performance lies precisely in the growth of the average wage.

In this regard, it should be clarified that the bond payment of wage labor and its performance is usually in our literature was seen as a measure is the relationship between the changes of submitting the results of labor and its subsequent amendments of payment: more the result of work - more than his pay and vice versa. In this interpretation wages - a function of its quantity, the result, and the number, the result of work - an argument for its payment.

In our view, the relationship between wages and productivity in business organizations more clearly manifested in the relationship between the initial level of wages and the appropriate level of its performance - the higher the level of pay, the greater the performance, working out great hopes entrepreneur. Therefore, in this case, the growth of labor benefits the employee, are the result of the work function due to the size, increasing its payment. Without proper employment benefits, the study results or that given a particular level of wages can be unprofitable for the entrepreneur (inflated), with all the ensuing consequences (devastation, out of business.)

Question 8

To the complex issues presented as straight as possible will use the example of a properly selected. First let's examine what happens in the market, while among bidders there are only two types of companies A and B. Assume that this amount is sufficient bidders to consider this market as an example of perfect competition. Analysis focuses on the case when the total cost function is typowe1. More than that for simplicity of presentation we assume ...