Question

Portray graphically the outcomes of in the following hiring scenarios of Kellogg's firm.

1. Kellogg's firm hiring economics advisors who are each deemed to be heterogeneous to whom the firm can practice wage differentiation

2. Kellogg's firm hiring middle management whose labor are deemed to be semi-homogeneous to whom the firm cannot practice wage differentiation.

Answer 1

Answer 1.

Wages (High skill) W2 ton (High skill) (Clow skill) A b. Creigh skill) نما Skull (Low skill) Q2 a ſzoveerits) Lebows. quantity

In this part, Kellogg's firm hiring economic advisors who are heterogeneous at different wages. The difference in wages is there because of the different skill sets of labor. This difference is there because of the difference in education, experience, and other skill-developing parameters that make a difference in their productivity, and hence their wages. In the above diagram, the horizontal axis represents the quantity of labor and the vertical axis represents the wages. Line 'S₁' is the supply of labor (economic advisors) with low skills, and line 'S₂' is the supply of labor with high skills. 'D₁' is the demand for low skilled labor and 'D₂' is the demand for high skilled labor. 'A' is the point where demand meets supply of low skilled labor with quantity 'Q₁' and wage 'W₁'. Similarly, at point 'B', labor quantity is 'Q₂' with wage 'W2'.

Answer 2:

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In this part, Kellogg's firm hiring middle management who are semi-homogenous at the same wages. In the above diagram, the horizontal axis represents the quantity of labor and the vertical axis represents the wages. Line 'S' is the supply of labor, and line 'S' is the supply of labor. At point 'E' the demand meets the supply, and the wage is 'W' with the quantity of labor 'Q'. There is no price differentiation because there is not much difference in the skills of the labor, hence, difficult to find out the different wages as per their productivity.