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Is the reservation wage equal to the minimum wage? Explain.

Is the reservation wage equal to the minimum wage? Explain.

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Answer #1

Reservation wage can be considered as the lowest wage at which a worker would be willing to accept a particular job. If the offered wage is less than reservation wage, the worker will reject the job. This has nothing to do with legal terms. On the other hand , minimum wage is the legally lowest wage that a worker should be given for doing a job and it has provisions on a legal basis unlike reservation wage. Therefore, both reservation wage and minimum wage might not be equal.

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