Why do different people earn different incomes and why do different jobs pay different wages?
Different jobs require different sets of skills, knowledge, and abilities, as well as different risks of injury, resulting in many different labor markets. In each labor market, the demand and supply of a specific type of labor determine the equilibrium wage rate. Depending on the demand and supply conditions in different labor markets, wages are very likely to be different. Economists refer to these wage differences due to different risks or job characteristics as compensating wage differentials. • When the government intervenes in the market by providing a subsidy, what is the result? A subsidy provided by the government reduces the price consumers actually have to pay for the subsidized good or service. The subsidy increases the demand for the good or service, causing an increase in the market price and the quantity produced and sold. • When the government intervenes in the market by setting a price floor or ceiling, what is the result? A price ceiling occurs when a price is not per
