When the wage rate increases, what will be the opportunity cost of le…

The correct answer is option 3: Opportunity cost of leisure increases

 

• Opportunity cost is the value of the next best alternative foregone.
• In this case, the opportunity cost of leisure is the income forgone by not working.
• When the wage rate increases, each hour of leisure means losing more income than before.
  • Example:
    • If the wage was ₹100 per hour, taking an hour of leisure costs ₹100 in lost wages.
    • If the wage increases to ₹200 per hour, taking an hour of leisure now costs ₹200.
• Since leisure now comes at a higher forgone income, its opportunity cost increases.