The labor supply curve may have a backward-bending portion if, at higher wages, the income effect is
A)smaller than the substitution effect.
B)larger than the substitution effect.
C)negative.
D)Any of the above could result in a backward-bending supply curve.

Question

Quizplus · Accepted Answer

As wages increase, the income effect may become larger than the substitution effect because workers may choose to work less and have more leisure time since their income needs are met. This causes the labor supply curve to bend backward.

The Labor Supply Curve May Have a Backward-Bending Portion If