Answer to Question #225936 in Macroeconomics for Jusment

Question

A) Explain fully the conditions on which a workers bargaining power depends.

B) Define a reservation wage and explain why firms want to pay more than the reservation wage.

C) use an illustrative diagram to show and explain how the natural rate of unemployment is affected by an increase in unemployment benefits.

Answer 1

1) Bargaining power is based on the personal attributes like earnings. It is the responsibility of an individual and company to bargain over certain product making sure the available financial resources meet the set standards. A worker bargains on the amount of money rewarded after respective duty. Therefore, his bargaining power may influence his earnings.

2) Reservation wage tends to be minimum amount of wage a worker needs so as be part of labor market. 

3)

When the unemployment benefits without labour increases, people may want to take advantage of the situation. This may involve quiting oppressing jobs and taking unemployment benefits at their comfort.