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An individual supply curve for labour will bend backwards when?
an individual supply curve for labour will bend backwards when?
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Nidhi taparia Best Answer
As per typical microeconomic theory, individual labour supply curves are always backward bending. This is because at very high levels of wages, labourers feel encouraged to work less and enjoy leisure more. There are two effects related to determining supply of labour. The substitution effect states that a higher wage makes work more attractive than leisure. Therefore, in response to higher wages, supply increases because work gives greater remuneration. The income effect states that a higher wage means workers can achieve a target income by working fewer hours. Therefore, if wages increase, it becomes easier to get enough income through working fewer hours. At high level of wages, people feel their target level of income has already been achieved. Hence they are now willing to spend more time as leisure than the working time. This is when the labour supply curve begins to bend backwards.