Unformatted text preview: The wage is in terms of how much other production a haircut will buy. e. Suppose workers can move freely between being farmers and being barbers. What does this mobility imply for the wages of farmers and barbers? Barbers will respond to the higher relative wage of farmers by moving into farming. f. What do your previous answers imply for the price of haircuts and the price of food? The supply of labor in the barber business will fall, increasing the MPL of the remaining barbers and raising their wage. The barbers who have turned farmers will drive down the wage rate but will still be earning more than if they had remained barbers. In equilibrium the wages in the two occupations will be equal IF all other characteristics of the jobs are equally desirable (a BIG assumption). g. Who benefits from technological progress in farming – farmers or barbers? Both benefit. Everyone shares in the gains from technological improvement....
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- Winter '08
- Supply And Demand, Employee Benefit, real wage