Labor Economics
Labor Economics
8th Edition
ISBN: 9781260484434
Author: George Borjas
Publisher: Mcgraw-hill Higher Education (us)
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Chapter 2, Problem 1RQ
To determine

Determine the change on the reservation wage if nonlabor income increases. 

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Explanation of Solution

The reservation wage is the wage that makes a person indifferent between working and non-working. This definition of the reservation wage indicates that when the market wage is lower than the reservation wage, the person will not work, while if the market wage exceeds the reservation wage, then the person will work. 

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