as wages go up, what happens to opportunity cost of leisure

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Ans)

When the which rate increases the opportunity cost of work of leisure also increases. Let us define the leisure which means extra time that the worker devotes on himself or other recreational activities rather than devoting that time to the work.

So when the worker is enjoying the leisure time, he is not earning any income.In this case, the opportunity cost of leisure is the income forgonr that he could have earned working during that period of time.

So when the wage rate increases the opportunity cost of leisure also increases.

It can be illustrated with an example below:

Suppose John works in a factory and earn $10 per hour. When he takes some break(say 3 hours) then he is not paid $10 rate for those hours.So his opportunity cost is $30 ($10 × 3 hours).

Now suppose that the wage rate increases from $10 to 15 dollars.So in this case the opportunity cost increases to $45 ($15 × 3 hours).

Rahul Sunny answered 1 year ago

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