The labor supply curve starts to bend backward once the
A)Income effect exceeds the substitution effect.
B)Substitution effect exceeds the income effect.
C)Marginal revenue product of labor equals the marginal utility of leisure.
D)Total utility of leisure outweighs the total utility of labor.

Question

Quizplus · Accepted Answer

The labor supply curve bends backward when the income effect, which represents the change in an individual's consumption patterns due to a change in their income, exceeds the substitution effect, which represents the change in consumption patterns due to a change in relative prices of goods or services. This occurs because as wages increase beyond a certain point, individuals may value their leisure time more than the additional income from working more hours, leading them to work less.

The Labor Supply Curve Starts to Bend Backward Once the