the backward bending supply curve of labour indicates?

ECONOMICS
WAEC 2018

the backward bending supply curve of labour indicates?

  • A. an abnormal supply situation
  • B. the law of supply
  • C. that labour supply and wage are directly related
  • D. that the elasticity of supply is uniform

Correct Answer: C. that labour supply and wage are directly related

Explanation

The reason is that there are two effects related to determining supply. The substitution effect states that a higher wage makes work more attractive than leisure. ... The income effect states that a higher wage means workers can achieve a target income by working fewer hours. Backward bending supply curve is the normal case for most workers. Most economists agree that a worker's supply curve for labor slopes upward at lower wages and bends backward at higher wages.



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