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Eco212

In: Business and Management

Submitted By makungu02
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Essay Three The president of the Seattle credit card processing company Gravity Payments, Dan Price, recently announced that a cut would be made to profits and his pay in order to raise the minimum wage at the firm up to $70,000 a year. This move by Mr. Price has drawn both applause from some and criticism from others. Among those criticizing the move, suggestions are being made stating the move is counterproductive because it creates an incentive for workers to slack off and be lazy, some insist it is not the right method of operating, and Rush Limbaugh has gone as far as referring to this method as being “pure, unadulterated socialism.” By setting this new minimum wage, Mr. Price is not following the forces that influence wages and rule to maximize profits within the market, instead he is deciding to do what he believes is best for him, his employees, as well as the firm, specifically in the long-term. Mr. Price also suggests that his decision will help reveal the “corrosive effects of income inequality” in society. Another word in is defense was made by an economist at the conservative Manhattan Institute for Policy Research, by stating “you get what you pay for” when dealing with the labor market. Only after a few days after Gravity Payments made the announcement, they “heard from more than 3,500 hopeful applicants” and “signed up several new clients.” The decision by Dan Price to increase minimum wage will definitely affect both the demand and supply of labor of his firm. Although, in this particular instance acting a price maker as opposed to price taker by deciding to increase the wage regardless of the going market rate. Although we do not have the exact numbers, we can predict that with the response cited to the announcement of increase in wages will increase the supply of demand to the company. As labor increases Gravity Payments will likely

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