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 rate is the rate which wage paid to the labour for a particular period.The price of the commodity and wage rate are positively related. Price of the commodity is determined by wage rate . Because wage rate determind the puchasing power of the consumer and also determind the production cost so wage rate and price of the commodity or selling price is correlated.  Rise in the the wage rate rises the production costs of the firms , this will lead to rise the selling prices.The price of the product risees the consumers demand will be lower.Which means low level of output will be produced and sold. That means the number of labour used in production is less. Price changes are determined by many factors,market trend means demand and supply,income, substitute or complimentary goods, production cost etc,same as wages changes occuring due to demand and supply of labour,inflation,gender, time etc.Wages and price are related each other.

Real wage is the puchasing power of the wage which is adjusted to inflation. But 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.For instance :- If the inflation rate/ price rice is 10% and the wage/earning is $100 that means Nominal Wages are $100. that means nominal wage is the amount of wage in money terms. At the same time  your real wage is $90 because real wage shows the purchasing power of money earn as a wage.