Suppose there are only two industries in the economy. All workers have the same skills and the same preferences. But the jobs in the two industries are different. In the Pleasant industry, working conditions are desirable (quiet, safe, clean, etc.). In the Grimy industry, working conditions are awful (noisy, unsafe, dirty, etc.).
a. Draw supply-and-demand diagrams for the labour market in each industry.
b. In which industry are wages higher? Why?
c. Now suppose the Grimy industry made its working conditions just as pleasant as in the Pleasant industry. Explain what happens in both labour markets.