The classical labor supply function is shown as A)N^s = g(P/W). B)N^s = g(W/P). C)N^s = t(W/P^e). D)N^s = t(P^e/W).

Question

Quizplus · Accepted Answer

The classical labor supply function is expressed as N^s = g(W/P), where W is the wage rate and P is the price level. This reflects the basic economic principle that individuals are more likely to supply labor as wage rates increase, all other things being equal. Choice A is incorrect because it has P on both sides of the equation, which is mathematically incorrect. Choice C and D are incorrect because they are not the standard form of the classical labor supply function.

The Classical Labor Supply Function Is Shown as