Question #291651

Calculate the real wage(W/P) if the value of the markup, u=0.1


1
Expert's answer
2022-02-01T11:32:28-0500

Calculate the real wage(W/P) if the value of the markup, u=0.1


Price setting equals the wage-setting equation via the real wage:

wp=11+m=1u\frac{w}{p}=\frac{1}{1+m}=1-u

Where m is markup and u is the unemployment rate.

Real wage = wp=11+m=10.1\frac{w}{p}=\frac{1}{1+m}=\frac{1}{0.1}

= 11.1\frac{1}{1.1}

Therefore, real wage wp\frac{w}{p} = 0.9091


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