Reservation Wage as a Monetary Equivalent of the Reservation Option
The reservation wage quantifies the value an individual places on their reservation option by expressing it as a monetary equivalent. It represents the wage at which a person would be indifferent between taking a job and remaining in their next best alternative. For instance, if a job seeker determines their reservation wage is €600 per week, it signifies that they consider their situation of being unemployed and searching for work to be equivalent in value to having a job that pays €600 per week.
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Social Science
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Economics
Economy
Introduction to Microeconomics Course
CORE Econ
Introduction to Macroeconomics Course
Ch.1 The supply side of the macroeconomy: Unemployment and real wages - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
Ch.6 The firm and its employees - The Economy 2.0 Microeconomics @ CORE Econ
The Economy 2.0 Microeconomics @ CORE Econ
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Learn After
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If an individual's reservation wage is $15 per hour, it implies that they value their time spent in their next best alternative (e.g., leisure, job searching) at less than $15 per hour.
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