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Peregrinus Peregrinus
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6 years ago
"The wage rate (w) is the 'price' that the labor market attaches to an hour of the individual's time."  How is this any different from the individual's marginal rate of substitution between leisure and income?  Explain carefully.
Textbook 
Modern Labor Economics: Theory and Public Policy

Modern Labor Economics: Theory and Public Policy


Edition: 12th
Authors:
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#1
6 years ago
The marginal rate of substitution between leisure and income represents the dollar value an individual attaches to the marginal hour of time.  The MRS is subjective to the individual and determined by the individual's tastes and preferences for income and leisure.  The wage rate is objectively determined by market forces and represents the amount that an individual would be paid for an hour of work time.  It is a price in the sense that the wage is the amount an employer must pay in order to rent an hour of labor service.
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