Textbook Notes (368,588)
Canada (161,988)
Economics (479)
ECO100Y1 (80)
Chapter 2

Chapter 2

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Erik Gunderson

CHAPTER 2 Analyzing labour force participation behaviour Reservation wage wage rage at which an individual would be indifferent between participating and not participating in the labour force; the lowest wage required to prevent the worker from withdrawing from the labour force; the wage threshold that suffices to induce a nonparticipating worker to join the labour force; slope of the individuals indifference curve at zero hours of work (W ) R 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 individuals 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 Income effect: the portion of the change in quantity demanded resulting from a price change that is attributed to
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