It exists when price differences depend critically on differences in the costs of production of serving different groups of buyers. Refer to the above table. The percentage change in the real wage minus the percentage change in the price level equals the percentage change in the nominal wage. The percentage change in the price level minus the percentage change in the nominal wage equals the percentage change in the real wage. The percentage change in the nominal wage minus the percentage change in the price level equals the percentage change in real wage.
Skilled labor has higher marginal revenue products than unskilled labor.
The demand for unskilled labor is greater than the demand for skilled labor. The supply of skilled labor is greater than the supply of unskilled labor.