If a group has a negative elasticity of labor supply (above some income level), then continued increases in wages will result in decreases in the quantity of labor supplied.

Question

Quizplus · Accepted Answer

When the elasticity of labor supply is negative, it means that as wages increase, individuals choose to work less because they can maintain or improve their standard of living by working fewer hours. This leads to a decrease in the quantity of labor supplied as wages continue to rise.

If a Group Has a Negative Elasticity of Labor Supply