The Wage-Price Rigidity Analysis

Paper Info
Page count 1
Word count 164
Read time < 1 min
Topic Economics
Type Essay
Language 🇺🇸 US

Price-wage rigidity or stickiness describes a scenario where a commodity’s price remains constant immediately to the new market-clearing price after changes in the demand and supply curve. In this particular situation, market prices and wages fail to respond quickly to equilibrium despite shifts in the general economy that indicate that a new price is optimal (Rowthorn, 2020). It may occur when firms remain reluctant to adjust prices of commodities by embracing a wait-and-see approach.

I strongly agree with Keynes’ assessment that wage-price rigidity requires the government’s involvement in the markets. The reason is that the employment rate can drop below the natural level when real wage increases beyond the equilibrium value (Rowthorn, 2020). The lower employment rate is detrimental to the broader economy because when more people lose their jobs, there is a decline in cash flow, consequently requiring more time for the economy to reach equilibrium. The government can intervene to remedy such situations with minimal impact on the economy by giving rebates.

Reference

Rowthorn, R. (2020). The Godley–Tobin lecture: Keynesian economics–back from the dead? Review of Keynesian Economics, 8(1), 1-20.

Cite this paper

Reference

NerdyBro. (2022, June 7). The Wage-Price Rigidity Analysis. Retrieved from https://nerdybro.com/the-wage-price-rigidity-analysis/

Reference

NerdyBro. (2022, June 7). The Wage-Price Rigidity Analysis. https://nerdybro.com/the-wage-price-rigidity-analysis/

Work Cited

"The Wage-Price Rigidity Analysis." NerdyBro, 7 June 2022, nerdybro.com/the-wage-price-rigidity-analysis/.

References

NerdyBro. (2022) 'The Wage-Price Rigidity Analysis'. 7 June.

References

NerdyBro. 2022. "The Wage-Price Rigidity Analysis." June 7, 2022. https://nerdybro.com/the-wage-price-rigidity-analysis/.

1. NerdyBro. "The Wage-Price Rigidity Analysis." June 7, 2022. https://nerdybro.com/the-wage-price-rigidity-analysis/.


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NerdyBro. "The Wage-Price Rigidity Analysis." June 7, 2022. https://nerdybro.com/the-wage-price-rigidity-analysis/.