The "backward bending" portion of the labor supply curve implies that
A)higher wages lead to an increase in hours of work supplied.
B)the law of diminishing returns has settled in.
C)higher wages lead to fewer hours of work supplied.
D)a minimum wage law is in effect.

Question

Quizplus · Accepted Answer

The "backward bending" portion of the labor supply curve implies that higher wages lead to fewer hours of work supplied. This can occur because as wages increase, workers may feel that they have enough income or become more selective about the jobs they take, leading them to reduce hours worked. Additionally, as wages rise, substitution effects may become less important, causing income effects to dominate, leading workers to choose more leisure time.

The "Backward Bending" Portion of the Labor Supply Curve Implies