If an individual's labor supply curve is backward bending, then:
A) the income effect associated with a higher wage is greater than the substitution effect.
B) the substitution effect associated with a higher wage is greater than the income effect.
C) the substitution effect associated with a higher wage encourages more leisure.
D) A and C
E) B and C

Question

Quizplus · Accepted Answer

The backward bending labor supply curve occurs when the income effect of a higher wage (leading to a desire for more leisure, thus working less) outweighs the substitution effect (the tendency to work more because leisure becomes relatively more expensive).

If an Individual's Labor Supply Curve Is Backward Bending, Then