MORE ABOUT DEMAND, WAGES AND INCOME

Task 16

Read the text to yourself and be ready for a comprehension check-up

The most obvious cost a person bears in buying a product is the price of the product. Price reflects cost because people have a limited amount of funds that they can spend, and if they spend their money on one thing, they cannot spend it on another. When the price of a product goes up, the amount of other things that a person must give up in order to buy the product rises. The amount of income a person receives affects the cost of buying an item because it determines which options a person must give up when buying a product.

REAL PRICES

Real prices and ideal prices refers to a distinction between actual prices paid for products, services, assets and labor, and computed prices which are not actually charged or paid in market trade. Ideal prices, expressed in money units, can be estimated, theorized or imputed for accounting or calculation purposes. They can nevertheless influence economic behavior. Examples of ideal prices

An example of an ideal price would be the value of annual Gross Domestic Product. This aggregate price is an ideal price, derived through an accounting procedure from statistical observations of actual prices charged and paid. Included in this ideal aggregate price there are many estimated and imputed prices reflecting the assumed monetary value of products and services.

Actual and potential prices

When goods are produced for sale, they may be priced, but those prices are initially only potential prices. There may not be any certainty about whether they will all fetch exactly those prices when they are actually sold, or whether they will be sold at all.

The number of ideal prices used for calculations in the world vastly exceeds the number of real prices. At any time, most economic goods and services in society are being owned or used, but not traded; nevertheless people are constantly extrapolating prices which would apply if they were traded in markets or if they had to be replaced.

The use of ideal prices for the purpose of accounting, estimation and theorizing has become so habitual and ingrained in modern society, that they are frequently confused with the real prices actually realized in trade. Thus, prices may be viewed only as a kind of data, information, or a type of knowledge.

REAL INCOME

Real income is the income of individuals or nations after adjusting for inflation. It is calculated by subtracting inflation from the nominal income. Real variables, such as real income, real GDP, and real interest rate are variables that are measured in physical units, while nominal variables such as nominal income, nominal GDP, and nominal interest rate are measured in monetary units. Therefore, real income is a more useful indicator of well-being, since it is based on the amount of goods and services that can be purchased with the income

REAL WAGES

The term real wages refers to wages that have been adjusted for inflation. This term is used in contrast to nominal wages or unadjusted wages.

The use of adjusted figures is in undertaking some form of economic analysis. For example, in order to report on the relative economic successes of two nations, real wage figures are much more useful than nominal figures.

year, inflation has to be taken into account — and thus using real wages as the measuring stick.

Real wages are a useful economic measure, as opposed to nominal wages, which simply show the monetary value of wages in that year.

Task 17

Copy out the dominant noun/verb/adjective for each part and find the words associated with them in meaning.

Task 18

Translate the sentences beginning with there is/are

Task 19

Date: 2015-12-11; view: 920