ECON 306 Chapter Notes - Chapter 8: Competitive Equilibrium, Perfect Competition, Equilibrium Point
8 Apr 2017
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Five principal circumstances that make up for the existence of compensating wage differentials: ransfer1) agreeableness or disagreeableness of the job. 2) the easiness and cheapness / difficulty and expense of learning the job. 5) probability / improbability of success (6 - safety risks involved in performing jobs) Wages serve the purpose of compensating employees for undesirable working conditions or for negative or costly attributes associated with a particular job. Vice-versa: low wages compensate for desirable working conditions. Defined by the isoprofit curve, where various combinations of wages and safety will provide the firm with the same level of profits. Diminishing marginal rate of transformation between wage and safety. The more safety, the more of a reduction in wages to increase said safety, and the more wages, the more safety is sacrificed to make up for the extra wage. Closer to the origin = higher profit because of wages/safety (aka further away from origin) is more costly.
