In the backward-bending portion of a labor supply curve:

Question

Quizplus · Accepted Answer

In the backward-bending portion of a labor supply curve, the income effect of a wage change outweighs the substitution effect. This means that as wages increase, workers may choose to work fewer hours because they are able to earn the same amount of income with fewer hours worked. This can happen, for example, when a worker already works long hours and values their leisure time more as their income increases. Therefore, the labor supply curve bends backward at high wage levels.

In the Backward-Bending Portion of a Labor Supply Curve