Scenario 19-4
Assume that the labor market for barbers is competitive and that it is differentiated into two groups: barbers who are bald (or going bald)and those who have a full head of hair.Assume that the barbers in this market have identical hair-cutting ability,regardless of whether they are bald or not.Currently the equilibrium wage in the bald barber market is lower than that in the nonbald market.Further assume that the market for haircuts is competitive.
-Refer to Scenario 19-4.If consumers do not discriminate between bald barbers and barbers with hair,then

Question

Quizplus · Accepted Answer

Since consumers do not discriminate between bald barbers and barbers with hair, the demand for haircuts will be the same regardless of the barber's hair status. Therefore, barbershops that hire bald barbers can pay lower wages and still attract customers, making them more profitable than barbershops that hire barbers with hair who demand a higher wage. This will eventually increase the demand for bald barbers in the market, leading to a shift in the equilibrium wage towards equality between the two groups of barbers.

Scenario 19-4 Assume That the Labor Market for Barbers Is Competitive and Competitive