Question

The indifference principle is the ability of an asset to move from lower to higher valued uses is the force that moves an industry toward long-run equilibrium. This is my first time reading and learning about this concept. However, after looking into it began to make more sense. On the topic of job search, I thought of two different scenarios. The first situation would be a person who is looking for a job but is not currently employed. When applying for positions and choosing a job, this person is likely to be more open-minded. They will likely take the first position offered because the other option would be to stay unemployed. In the second situation, the person is currently employed. Because of this, they are more likely to pick and choose not only which jobs they apply to but also the interviews they take, and ultimately the position they choose. Considering the principle in this scenario, all factors are not necessarily seen as equal between all the options. Additionally, because the person is employed they may be in less of a rush to get a job. They are going to weigh the pros and cons of each job more than the person in the first scenario.

Please respond to post in 100-150 words

Answer 1

In first scenario the unemployed person will choose the first position which is offered on less salary and when he/she becomes employed then he/she will become choosy and will pick only those positions which are highly paying to him/her and due to this supply of employed people towards high paying jobs will get increased and this will increase the competition among them and this will reduce their salary offered also due to more supply than demand.

On the other hand due to less supply of people for less paying jobs, this will increase demand for these people and this will increase their salary level also due to high demand than supply and due to this high paying jobs will also become less attractive and earlier kind of jobs will become more attractive until long term equilibrium is reached when there will be same salary in both of kind of jobs.