QUESTION 5 Why is the market supply curve of labor positively sloped though indi
ID: 1195049 • Letter: Q
Question
QUESTION 5
Why is the market supply curve of labor positively sloped though individual supply curves are backward-bending beyond a certain wage rate?
People tend to substitute labor for leisure.
All the individual supply curves do not bend backward at one particular wage rate.
People work more for the fear of losing their jobs and becoming unemployed.
People tend to work less when wage rate increases.
Every individual laborer has equal trade offs between labor and leisure.
a.People tend to substitute labor for leisure.
b.All the individual supply curves do not bend backward at one particular wage rate.
c.People work more for the fear of losing their jobs and becoming unemployed.
d.People tend to work less when wage rate increases.
e.Every individual laborer has equal trade offs between labor and leisure.
Explanation / Answer
Individual supply curve for labor does not speak anything else for overall labor supply curve. After some point labor and leisure are substituted but it does not mean that all labors have same preference for work and leisure. They substitute the leisure for work at different wage rate. Hence Overall labor supply does not bent backwards.
correct options is (b)