Concept explainers
Explain the shape of individual supply curve of labor and for the market supply curve.
Explanation of Solution
In a market, the individuals make a trade-off between labor and leisure. In this case, if wage rate increases, the substitution effect dominates and workers substitute work for leisure. If wage increases to higher level, then the additional income is less important because these high wages yield with less work. Here, income effect dominates and leads to workers substituting leisure for work. Thus, the supply curve bends backward.
Market and industry labor supply curve are always positive slopped because if there are higher wages in one market, then it bring out supplies from other market.
Want to see more full solutions like this?
Chapter 11 Solutions
Loose-leaf Version for Microeconomics: Principles for a Changing World 4e & Sapling e-Book and Homework (Six Months Access)
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education