The backward bending portion of an individual labour supply curve is indicative of:
A)a desire to increase work effort (hours) as wage rate rises
B)dominant income effects at higher levels of income
C)dominant income effects at lower levels of income
D)a desire to reduce work effort (hours) as wage rate falls

Question

Quizplus · Accepted Answer

The backward bending portion of an individual's labor supply curve indicates that at higher levels of income, the income effect (which leads to a desire for more leisure and thus less work) outweighs the substitution effect (which would lead to working more hours due to higher wages). This results in a reduction of work hours as wages continue to increase beyond a certain point.

The Backward Bending Portion of an Individual Labour Supply Curve