Author Question: What is human capital? How is it important in the determination of a worker's wage rate? What ... (Read 165 times)

yoooooman · **on:** Jun 29, 2018

What is human capital? How is it important in the determination of a worker's wage rate?

What will be an ideal response?

Question 2

In an indifference curve/budget line framework, how does a consumer decide which of all possible combinations of goods to purchase?

What will be an ideal response?

juliaf · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

Human capital is the skill, education, and training that a person acquires. The more human capital a person has, the higher the person's productivity and hence the higher the person's value of the marginal product. A higher value of the marginal product increases the demand for the worker and leads to a higher wage rate.

Answer to Question 2

The consumer will select the combination of goods and services that he or she most prefers and which he or she can afford to buy. Taking the latter consideration first, the consumer will buy a combination of goods and services that lie upon the budget line because all of these combinations are affordable. From the combinations that lie upon the budget line, the consumer will select the combination that is on the highest indifference curve because this is the combination that is most preferred.