A person’s labor supply curve is more likely to slope downwards (bend backwards) when Hours worked...
- A person’s labor supply curve is more likely to slope downwards
(bend backwards) when
- Hours worked are higher.
- The wage is higher.
- Income and leisure are viewed more as compliments.
- All of the above.
- None of the above
Homework Answers
The reason behind the backward bending labor supply curve is basically the substitution effect and the income effect. Initially when there is an increase in wages labor supply also increases. At this stage, substitution effect is more than income effect and labors increase the working hours to earn more. After a certain point, the increase in wage rate does not induce workers to increase the working hours rather they prefer to earn the desired income by working for some specific hours which is possible due to higher wage rate and spare the remaining time at leisure. At this stage, Income effect is more than substitution effect. Hence the answer is d-All of the above
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