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Justifying a Wage Increase Strategy
A business owner wants to expand their workforce from 40 to 60 employees. They currently pay a weekly wage of €650. To attract the additional 20 workers, they are advised that they must increase the wage to €700. The owner responds, "I don't understand why I need to raise the wage. If I was able to find 40 people willing to work for €650, there must be at least 20 more people in the city who would also accept that wage. We should just advertise more."
Critique the business owner's reasoning. Explain why simply advertising more at the €650 wage is unlikely to attract the needed 20 additional workers and why the €700 wage is necessary.
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Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.6 The firm and its employees - The Economy 2.0 Microeconomics @ CORE Econ
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