An individual's supply curve of labor is backward bending when:

Question

Quizplus · Accepted Answer

The backward bending supply curve of labor occurs when the substitution effect (where higher wages encourage more work due to the opportunity cost of not working) dominates at lower wage rates, leading to an increase in labor supply. However, as wages continue to rise, the income effect (where higher wages allow a person to maintain the same standard of living while working less) dominates, causing the individual to supply less labor. This results in the supply curve bending backward at higher wage rates.

An Individual's Supply Curve of Labor Is Backward Bending When