Question

The backward-bending labor supply curve occurs because workers value leisure:a. and income differently as wages change.b. consistently more than they do income at all wages.c. consistently less than they do income at all wages.d. and income by the same amount at all wages.e. and income by fluctuating, unpredictable amounts at any wage.

Answer 1

Answer: C

Explanation:In economics, a backward-bending supply curve of labour, or backward-bending labour supply curve, is a graphical device showing a situation in which as real (inflation-corrected) wages increase beyond a certain level, people will substitute leisure (non-paid time) for paid worktime and so higher wages lead to a decrease in the labour supply and so less labour-time being offered for sale.[1]

The "labour-leisure" tradeoff is the tradeoff faced by wage-earning human beings between the amount of time spent engaged in wage-paying work (assumed to be unpleasant) and satisfaction-generating unpaid time, which allows participation in "leisure" activities and the use of time to do necessary self-maintenance, such as sleep. The key to the tradeoff is a comparison between the wage received from each hour of working and the amount of satisfaction generated by the use of unpaid time.

Such a comparison generally means that a higher wage entices people to spend more time working for pay; the substitution effect implies a positively sloped labour supply curve. However, the backward-bending labour supply curve occurs when an even higher wage actually entices people to work less and consume more leisure or unpaid time.