Suppose that a number of identical firms exist within a perfectly competitive market. One of these firms is considering adopting the practice of letting employees dress casually; currently, all firms impose a strict dress code. Suppose that employees really like the policy; all else equal, they strongly prefer to work for a company that lets them wear what they want to work. Also suppose that the policy has no effect on the production function of any business that adopts it - so the relaxed dress code, in itself, doesn't affect productivity for better or worse. Following the logic of the model of perfect competition, explain in careful detail the chain of events starting with one firm being the first in the market to adopt the policy. Think carefully about the first step in the process, the subsequent steps, and the ultimate consequences in terms of who ends up benefitting from this policy. Use the graphs below to illustrate how the market changes, and be descriptive in your explanation of each step in your logic.

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