Which of the following helps to explain why the supply curve of labour is upward sloping?
A)The supply curve of labour is a derived supply curve; since the output supply curve is upward sloping, so is the labour supply curve.
B)As the wage rate rises, the income effect causes the quantity of labour supplied to increase.
C)The substitution effect of a price change makes a good more expensive relative to other goods.
D)As the wage rate rises, the opportunity cost of leisure rises.

Question

Quizplus · Accepted Answer

As the wage rate rises, workers face a higher opportunity cost of not working (i.e. giving up leisure time) in order to earn more money. This increases the incentive for workers to supply more labour, resulting in an upward sloping supply curve.

Which of the Following Helps to Explain Why the Supply