Q.A worker's nominal (money) wage was Rs. 8,000 per month in Year 1, when the price index (base year) stood at 100. By Year 2, the price index had risen to 125, and the worker's nominal wage was raised to Rs. 10,000 per month. Calculate the worker's real wage in Year 2 (expressed in Year-1 rupees), and state whether the worker is economically better off, worse off, or exactly as well off as in Year 1.

Wages paid in terms of goods and services are real wages — option (a).

Wage concepts in distribution analysis:

• Nominal (money) wages — the amount of money a worker receives for labour, expressed in rupees.
• Real wages — the goods, services and amenities the worker actually obtains for that labour, i.e. the purchasing power of the money wage plus any payments in kind (free housing, food, etc.). Real wages show the true standard of living.
• Piece wages — paid according to the quantity of output produced. …

The reward for labour is Wage, so the answer is option (d).

The theory of functional distribution in the Tamil Nadu HSC Class-11 Economics syllabus assigns a distinct reward to each of the four factors of production:

• Land → Rent
• Labour → Wage
• Capital → Interest
• Organisation / Entrepreneur → Profit …

The correct option is (a) Piece wages: paid per unit of work done.

Piece wages are paid on the basis of the amount of work done — that is, per unit or piece of output produced — so a more productive worker earns more. This is contrasted with time wages, which are paid per unit of time (hour, day, month) irrespective of output.

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The definition of wages as money paid under contract for services is by Benham.

In distribution analysis, the reward for labour is the wage. Benham defined wages as "a sum of money paid under contract by an employer to a worker for services rendered." This is the money (nominal) wage concept — payment expressed in terms of money for work done. Walker, J. …

The Residual Claimant Theory was propounded by (c) Walker.

According to the Residual Claimant Theory of wages, put forward by the American economist Francis A. Walker, the total product of industry is first used to pay rent to land, interest to capital and profit to the entrepreneur. Whatever remains after these three shares are met is the residue, and this residual amount goes to labour as wages. Thus the worker is treated as the 'residual claimant'.

Why the others are wrong: …