If wage rates are not flexible, can the economy be self-regulating?
2007-03-12 16:40:15 · 5 answers · asked by linfinity27 2 in Social Science ➔ Economics
Yes.
More hours can be worked
2007-03-12 16:57:54 · answer #1 · answered by Santa Barbara 7 · 0⤊ 0⤋
Yes. Still.
The supply and demand of goods & service will always be free to move (or what you sayself regulated) to its equilibrium; based on wage rate (although fixed) in the economy.
If the wage rate is low. Then expensive goods and services will fade away or will not enter into the said economy. Producers are finding ways to cost- efficiently produce the goods with finding cheaper materials, labors and others and lastly push the price to the economy's affordability.
While higher fixed wage rate while goods are limited, will push the prices higher (as a lot of people willing to pay more). Then encourage more producers or exporters to add the supply and eventually get back to its equilibrium.
2007-03-12 17:02:18 · answer #2 · answered by Anonymous · 0⤊ 0⤋
regulated economy is the opposite of free economy. even if the salary levels not flexible, a governnment should allways let the market forces to take a decision regarding the problem. That is supply and demand. A governmaent must ONLY intervine when both forces fails to arrive at a decision .
2007-03-12 23:26:24 · answer #3 · answered by Kaushal 2 · 0⤊ 0⤋
No - self regulating economies adjust ALL prices (including those of labor) to adjust for changes in supply & demand.
Due to certain types of price stickiness, obviously, this is not an immediate effect....but it is an effect that inflexible wage rates will not allow for at all.
2007-03-13 02:28:49 · answer #4 · answered by Anonymous · 0⤊ 0⤋
no.. wages are a price like the price you find on food, or clothing. If wages are inflexable then there is no reason to try and do anymore than teh minimum, meaning that the price you pay for jeans will become increasingly higher and more and mroe unavailiabel because no one has any insentives to get them to you faster, and cheaper. But more and more insentives to be lazy and get them to you slower and more expensive.
Remember that the number on money means nothing unless it has the backing of goods and services behind it, and that changes with less insentives, and price controls are MUCH less incentives
2007-03-12 17:31:32 · answer #5 · answered by Max Power 2 · 0⤊ 0⤋