Homework Clinic
Social Science Clinic => Economics => Topic started by: daltonest1984 on Jun 29, 2018
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If a firm raised its price and discovered that its total revenue fell, then the demand for its product is
A) relatively elastic. B) perfectly inelastic. C) perfectly elastic. D) relatively inelastic.
Question 2
Janet Yellen, the chair of the Federal Reserve, is married to the Nobel prize winning economist George
A. Akerlof. When they hired babysitters in the 1980s, they decided to pay wages that were higher than the going wage for babysitters. If they could get a babysitter at a lower wage, what could explain why they decided to pay more?
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Answer to Question 1
A
Answer to Question 2
Efficiency wages could explain why employers choose to pay higher wages than they have to. Paying a wage that is higher than the going wage has been shown to attract the best talent. It also boosts morale leading to an increase in work effort and productivity and gives sitters an incentive not to shirk. In Yellen's and Akerlof's case, they found that their decision to pay higher wages ensured that they got excellent babysitters.
See http://www.nytimes.com/2013/10/10/business/economy/for-yellen-a-focus-on-reducing-unemployment.html?_r=0