In a perfectly competitive free market economy, a wage gap between two workers can be explained by differences in all of the following except their

(E) tastes for luxury goods

Explanation:

(E) tastes for luxury goods

The gap in wages can be explained through various reasons like assessing the living standard of people, by analyzing their taste toward buying goods, etc.

The tastes for expensive items is the easiest way to determine the gap in wages. The people who are earning fewer wages or those who are dependent on daily wages are less likely to attract towards expensive items. But people those are earning handsome wage are buying something that is branded or things that are in their status.

answersituation analysis;