Question

Hint Check of 15 > Answer Bank Stan's Snake Oil employs sales people. When the price level in the economy drops, Stan considers lowering the percentage he pays in commissions. After experiencing a decline in his wage, Happy is surprised to find that he can still save the same percentage of his income. Although the costs of raw lumber and transportation have recently fallen, so far, the lumberyard has held prices constant. Sleepy Mattress Wholesale actively monitors the price of cotton stuffing and changes mattress prices once a quarter to keep up. about us | Careers privacy policy terms of use contact us help

Answer 1

The sticky wage theory hypothesizes that pay of employees tends to have a slow response to the changes in the performance of a company or the economy.

Misperception theory holds that when a seller sees the price of its products decline, it makes an erroneous assumption that their relative prices have also declined.

Sticky prices are prices that do not adjust immediately to changing economic conditions.

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Sticky wage theory:Stans snake oil employes sale people, when the price in the economy drops, stan considers lowerinf the percentage he pays in commision, so we see pay of employees tends to have a slow response to the changes in the performance of a company or the economy.

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Sticky price theory:

Although the cost of raw lumber and transportation have recently fallen so far, the lumberyard has held prices constant, as we see that price is not changing immediately to changing economic conditions.

Sleepy mattress wholesale actively monitors the price of cotton stuffing and changes mattress price once a quater to keep up, so we see that price is not changing immediately to changing economic conditions.

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Misperceptions theory:

After experiencing a decline in his wage, happy is surprised to find that he can still save the same percentage, so we see that when a seller sees the price of its products (wage rate in case of labour) decline, it makes an erroneous assumption that their relative prices have also declined.