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DIFFERENTIALS AND DISEQUILIBRIUM
In a free enterprise system, workers aim at maximizing their wages. Hence, it would be expected that workers would move form low-paying industries to high-paying industries and the low-paying industries would raise wages so as to retain labour until wage rates were uniform for all workers.
In practice, however, we observe differentials in wages both between occupations and even within the same occupations. Differentials arising from the characteristics of the occupations are called compensating or equalizing differentials, because they represent pay units made to equalize the net remuneration and compensate the workers for differences in their jobs.
Suppose Fiat recently entered into an Agreement and Plan of Merger with Case for $4.3 billion. Prior to the merger, the market for four-wheel- Drive tractors consisted of five firm
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For some time, two firms have charged $0.90 per standard unit of crating materials for shipping a particular type of machine tool and each has been selling about 20,000 units per m
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