ECO100Y1 Chapter 2: Chapter 2
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if the market wage is less than the reservation wage individual will not participate in labour force. if the market wage exceeds the reservation wage individual will participate in labour force (since the return from engaging in labour market activity exceeds that individual"s valuation of time n nonlabour market activities) Normal good: a good whose quantity demanded increases with the level of income (leisure in the context of labour supply model) Inferior good: a good whose quantity demanded decreases with the level of income. Is higher and hence the person may substitute away from leisure) increase in reservation nonparticipant to enter the labour force and may cause some participants to withdraw from the labour force (pure income effect) wage - an increase in nonlabour income will never cause a www. notesolution. com. moonlighting: the choice of accepting additional work at a wage rate lower than that of the first job.
