Question

List three market reasons ( demand and supply reasons) for wage differentials.

Answer 1

Three market reasons for wage differentials are as follows:

1. Less supply of individuals with highly sophisticated skills that are in demand. For example, scientists and surgeons that are in demand, but are less in supply.

2. Demand for workers or professionals who can work in difficult scenarios, hence commanding a higher wage. For example, people working in challenging and difficult scenario.

3. A shortage of people with higher natural abilities that makes them demand higher wages and creating wage differentials. For example, athletes and players in sports.