Explain the concept of a reservation wage

Assignment Help Business Economics

Reference no: EM131244416

a. Mr. Dilatoriness has a PhD in economics, but is happily unemployed; he spends most of his time reading classical literature, art and philosophy. He gets $ 3000 a week from his parents. His parents tired of his indolence, decide to cut down his weekly payment by 33.33% and ask him to join the family business at a wage rate of $ 20 an hour. Construct an income-leisure diagram showing Mr.Dilatoriness’ situation before and after. Under what circumstances would Mr. Dilatoriness maximize his utility? (Evaluate all possible income-leisure combinations under both scenarios)

b. Explain the concept of a reservation wage? Under what circumstances will the reservation wage be Negative? Give an example or draw an Income-leisure IC diagram.

Reference no: EM131244416

Questions Cloud

Demand tends to be : Demand tends to be:

The income effect and the added worker effect : Explain the relationship between the income effect and the added worker effect. With reference to output and substitution effects, explain why and how an increase in the wage rate of autoworkers will generate a negative employment response in the lon..

What happens to equilibrium price and quantity of ice cream : What happens to the equilibrium price and quantity of ice cream in response to each of the following? Explain your answers.

Assume firm is monopsonist in hiring labour : Assume a firm is a monopsonist in hiring labour and is selling the finished product as a monopolist. Portray the market equilibrium diagrammatically. Label all relevant curves, show the equilibrium wage rate and level of employment. Show the efficien..

Explain the concept of a reservation wage : Mr. Dilatoriness has a PhD in economics, but is happily unemployed; he spends most of his time reading classical literature, art and philosophy. He gets $ 3000 a week from his parents. Explain the concept of a reservation wage? Under what circumstanc..

To reduce unemployment the federal reserve authoritis should : To reduce unemployment, the Federal Reserve authoritis should

Tariffs and quotas are costly to consumers : Tariffs and quotas are costly to consumers because:

What will happen to price and output in the market : Etisalat and Du are duopolists. If they form a cartel between themselves, then what will happen to price and output in the market. Discuss your answer with a relevant diagram.

Difference between operating decisions-planning decisions : Explain the difference between operating decisions and planning decisions. Explain the following costs and observe carefully the difference between each one.

User Account

All Pages