Use the demand and supply diagram to explain the difference in pay between the doctors and...

Use the demand and supply diagram to explain the difference in pay between the doctors and the pizza delivery drivers. Show the diagram and explain why those demands and supply (for the two jobs) differ from each other.

Expert Solution

The doctor's pay scale is higher than the pizza delivery drivers. The wage rate of worker depends on the skill and productivity of the worker, knowledge, experience, and also on profession.

A person becomes a doctor after completing her medical studies and getting a degree on it. A doctor who becomes a specialized in certain field needs to study more on that specialized field and then a get higher degree after completing her sudies. So a doctor spends a lot of money, time and use her talent to become a doctor. When a doctor looks for job in health care sector, naturally the minimum wage rate at which she wants to supply her labor is greater than the wage rate of other profession. Moreover, the the supply of doctors, especially the specialized doctors are highly inelastic. The doctors' services are highly essential in a country. Each and everybody needs doctors' services. So doctors' services are high in demand. Even, the doctors raise their fees, the petients must go to the doctors for medical services. So, the demand curve for doctor's service is highly inelastic. Both, the supply and demand curve for doctors' services are inelstic, and the supply of doctor, especially the specialized doctors are lower than the demand for doctor in a country. All these factors make a high pay-scale of doctors.

In case of pizza delivery drivers, they need not to complete higher education. They need a driving skill and a knowledge of delivery manners. They need not to spend a lot of time to gain this knowledge. They are not making pizzas, so their productivity is also not very important determining their wage rate.The minimum wage rate, they want to deliver their services are much lower than many professions that need high skill, education,knowledge and experience. Moreover the supply of pizza delivery drivers are highly elastic than its demand. Thus, the pay scale of pizza delivery drivers are lower than the doctors.

In the above figure, the first sub-part(1) shows the doctors market, where on the horizontal axis, the number of doctors is measured and on the vertical axis, the price or wage rate of doctors is measured. S1S1 is the supply curve of doctors and D1D1 is the demand curve of doctors. The equilibrium wage rate of doctors is W1 and the equilibrium number of doctors at this wage rate is N1. The second sub -part(2) shows the market of pizza delivery drivers. where on the horizontal axis, the number of pizza delivery drivers is measured and on the vertical axis, the price or wage rate of pizza delivery drivers is measured. S2S2 is the supply curve of pizza delivery drivers and D2D2 is the demand curve of pizza delivery drivers. The equilibrium wage rate of pizza delivery drivers is W2 and the equilibrium number of pizza delivery drivers at this wage rate is L2. We see that W2 is lower than W1.

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Rahul Sunny answered 2 years ago

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