Under what circumstances will an individual's labor supply curve become backward bending? Explain.
What will be an ideal response?
When the wage rate increases, the substitution effect increases an individual's work effort, but the income effect decreases his work effort. Thus, the individual's labor supply curve will be backward bending if the income effect outweighs the substitution effect. Income effects are more likely to be large when the wage rate is high, so an individual's labor supply curve may become backward bending at high wage rates.
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Referring to Figure 2.1,if you increase the production of farm goods, what other area is affected?
A) how much people can purchase B) the production of manufactured goods C) the wages earned by farm workers D) the price of produce
An increase in production costs will shift? the:
A. aggregate demand curve.' B. shortrun aggregate supply curve. C. longrun aggregate supply curve. D. none of the above.
Refer to the figure below. What would be the impact on the three categories of people if they were given the value of medical insurance in cash instead of having it provided?
A perfectly competitive wheat farmer in a constant-cost industry produces 3,000 bushels of wheat at a total cost of $36,000. The prevailing market price is $15. What will happen to the market price of wheat in the long run?
A) The price remains constant at $15. B) The price falls to $12. C) The price rises above $15. D) There is insufficient information to answer the question.