Unformatted text preview: limousines, and vacation on the French Riviera, while other people live in small apartments, ride the bus, and vacation in their own back yards. Why do earnings vary so much from person to person? Chapter 18, which de-veloped the basic neoclassical theory of the labor market, offers an answer to this question. There we saw that wages are governed by labor supply and labor de-mand. Labor demand, in turn, reflects the marginal productivity of labor. In equi-librium, each worker is paid the value of his or her marginal contribution to the economy’s production of goods and services. E A R N I N G S A N D D I S C R I M I N A T I O N 417...
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- Spring '10
- Supply And Demand, Neoclassical economics, typical police officer, comparable wor th