Price Wage Rigidity (Business & Marketing Essay)

Price Wage Rigidity
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Price Wage Rigidity
Price wage rigidity refers to instances where both the price and wage levels do not change readily in accordance with economic shifts that result from shifts in demand and supply curves. In such a case, price rigidity downward leads to an excess in supply while the opposite leads to an increase in demand. On the other hand, wage rigidities downwards may lead to unemployment cases due to the lack of equilibrium in supply and demand (Goette, Sunde, & Bauer, 2007).
Keynes argues that wage-price rigidity requires the government's involvement in the markets. This is particularly true since a decrease in wages leads to unemployment in the sense that workers would not work for low wages that do not afford them a decent life (Keynes, 2019). Therefore, wages typically increase in tandem with increasing standards of living. In comparison, in the case...