Question

Read “Thing 3” in “23 Things they don’t tell you about Capitalism.”

According to the author, when looking at the wages of people in First World vs. Third World countries, one of the following terms (which he does not directly use) best explains why this difference exists. Choose the most appropriate term from the list below, then write 3-7 sentences explaining how it applies.

1. The Paradox of Efficiency

2. The Diamond-Water Paradox

3. Complementary Goods

4. Price Ceilings

5. The Lemon Problem

Answer 1

Price Ceilings : We set the wages at a higher rate.

This is because the wages of workers in the developed world are protected from the pressures of the market, which means they remain high, no matter how valuable the work may be.

For example, whatever your job, there will be people in other countries who will do it for less money. You aren’t subjected to this competition because the government protects your job. They use strict immigration controls to prevent people from poorer countries entering the workforce. Safe from these workers, your wages remain artificially high