ECON3317 Study Guide - Midterm Guide: Structural Unemployment, Utility, Aggregate Demand
Document Summary
Compensating differentials: compensating differentials- source of inequality that happens by choice. Important aspect of inequality: compensating wage differential: the amount more/less a firm must pay a worker to accept a characteristic of the job that is undesirable/desirable). Does not include wage differentials due to differences in worker skill, supply or other issues of productivity that may be industry specific. b. i. Compensating differentials put a price on the value of work conditions and to the worker represent a trade-off between safety, convenience, cleanliness, etc. and consumption. c. i. Could force them to do it or could choose to allow firms to compete for workers by offering higher wages if the job they are offering is somehow undesirable: employee tradeoff- indifference curves e. i. Assumptions: employees maximize utility, workers know and understand the risks across jobs, workers can move from job to job easily e. ii.
