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Critique of an Economic Prediction
An economic model predicts that a 10% wage increase for a company's software developers will lead to a significant increase in their weekly output (measured in lines of code). The company implements the wage increase but observes that the average output per developer actually decreases over the next month. The company's management concludes that the economic model was fundamentally flawed and that higher pay does not motivate their developers.
Critically evaluate management's conclusion. In your answer, propose at least two distinct and plausible alternative explanations for the observed outcome that do not necessarily mean the model's core assumption (that higher pay can increase motivation and output) is wrong.
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CORE Econ
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Economics
Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
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