Question

How does the amount of unemployment benefits impact the opportunity cost of job search?

Answer 1

Unemployment benefit acts as the income source in time of unemployment and supports a person during period of unemployment.

The amount of unemployment benefit dictates the efforts put in by the person to get job.

If amount of unemployment benefits are high then relative loss of income due to unemployment for a person is lower and therefore the opportunity cost of job search is also low.

On the other hand, if amount of unemployment benefits are low then relative loss of income due to unemployment for a person is higher and therefore the opportunity cost of job search is also high.

So, amount of unemployment benefits impacts the opportunity cost of job search in the sense that low unemployment benefits results in high opportunity cost of job search while high unemployment benefits results in low opportunity cost of job search.