Imperfect - Imperfect-Information Model The...

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Imperfect-Information Model The imperfect-information model of the upward sloping short- run aggregate supply curve is again based on the labor market. In this model, unlike either the sticky-wage model or the worker-misperception model , neither the worker nor the firm has complete information. That is, neither is better informed than the other is about the real wage, the nominal wage, or the price level. In this model, producers are considered to be really only aware of the price of the goods and services that they produce. That is, producers are unable to recognize overall increases in the price level because they are focused on their products only. Instead, producers only recognize changes in the prices of the goods and services that they produce. Given that producers are unable to recognize changes in the overall price level, they are likely to confuse changes in the goods and services they produce (relative changes in the price level) with changes in the overall price level (absolute changes in the price level).
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This note was uploaded on 02/09/2012 for the course ECO ECO2013 taught by Professor Jominy during the Fall '08 term at Broward College.

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