Fix Price-Flex Price in Development Economics

Dipak Ghosh

Australian Economic Papers, 1986, vol. 25, issue 46, 122-27

Abstract: In this paper, an attempt has been made to examine the link between inflation and unemployment in a developing country. An expansion of employment opportunities in these economies results in an increase in the demand for foodgrains. Prices of foodgrains being demand determined (flex price), this can cause the wage cost to increase, via an increase in the cost of living. Prices of most industrial goods being determined by cost of production (fix price), an increase in the wage cost causes prices of industrial goods to increase, thus giving rise to inflationary pressure for the economy as a whole. Copyright 1986 by Blackwell Publishers Ltd/University of Adelaide and Flinders University of South Australia

Date: 1986
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