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Will a free market tend to encourage or discourage discrimination? Explain briefly.
Therefore, it can be said that free markets disincentivize discrimination done by employers.
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Chapter 15
Labor Markets and Income
Markets and Welfare
The Economics of Labor Markets
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hi. In this video, we're going to be talking about discrimination in the flea market and whether the free market will encourage her this courage, this type of behavior from happening. The short answer is that generally the free market does this encourage discrimination, and this is because of production costs. Let's look at an example to see what we mean. Let's say we have two groups of people green workers and blue workers, and we're overthe east to workers. Or these two types of workers are equally productive. Now let's say that we have firms A and B there again, the same in all aspects except the firm A has a strong preference for green workers. Well, from B is completely okay with either one, since they need a stern level or off quantities of workers. If firm A wants to fill all of these spots withdrawing workers, they're going to have to pay them a higher wage. This is to incentivize wing workers to work for firm A and not from B. Since both firms are exactly the same in every other aspect and the workers are equally productive. Then both firms are producing the same output quantity because this is a competitive market, the price is fixed and it's not. It does not change within each firm. These two put together give us that both for would have equal total revenue. And again, the only difference when it comes to their outputs and their total revenue is the fact that ah, the firm A has a higher wage, then firm be right. And we know the wage is the price of labor. In other words, it's a production cost. So for Mei is spending more money on their workers, then Firm B is well. If total revenue is the same for both of these firms, then if costs for firm a degraded in the costs are firm be, then we know the profits off firm a air smaller than profits for Furby. And this is simply because profits is equal to total revenue minus total cost, right? So what happens in the long run is the firm A will have to leave the market because its profits are going to be negative or lower production costs by not discriminate. In other words, Firm A will not be able to compete with the low production costs of its competitors unless they stop discriminating hens. No, the free market would lead to discrimination Not happening because discriminating increases your production costs. Thank you for listening.
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