We could say that by default, the labor supply curve is upward sloping. This is because people are willing to supply more labor if the wage rate is higher. The wage rate has a positive relationship with the quantity of labor supplied.
What causes the supply curve for labor to shift?
Causes a worker to supply a larger quantity of labor, and the income effect causes a worker to supply a smaller quantity of labor As the wage increases, the opportunity cost of leisure increases, causing individuals to devote more time to working The supply curve for labor shifts with changes in
What does the upward slope of a supply curve represent?
This upward slope represents increasing marginal costs with an increase in production. When prices are low, quantity is low, but as price and profits increase, supply increases, as well, creating an upward curve. Supply curves can also be flat or even vertical.
What happens to the supply curve when the marginal cost increases?
When prices are low, quantity is low, but as price and profits increase, supply increases, as well, creating an upward curve. Supply curves can also be flat or even vertical. If the marginal cost stays the same, a flat curve results.
Is there a backward-bending supply curve for labor?
That possibility is illustrated between points B and C on the supply curve in Figure 12.8 “A Backward-Bending Supply Curve for Labor”; Ms. Wilson’s supply curve is vertical. As wages continue to rise, the income effect becomes even stronger, and additional increases in the wage reduce the quantity of labor she supplies.
Why are supply curves sloping?
It is quite likely that some individuals have backward-bending supply curves for labor—beyond some point, a higher wage induces those individuals to work less, not more. However, supply curves for labor in specific labor markets are generally upward sloping. As wages in one industry rise relative to wages in other industries, workers shift their labor to the relatively high-wage one. An increased quantity of labor is supplied in that industry. While some exceptions have been found, the mobility of labor between competitive labor markets is likely to prevent the total number of hours worked from falling as the wage rate increases. Thus we shall assume that supply curves for labor in particular markets are upward sloping.
What would any one individual's supply curve for labor look like?
What would any one individual’s supply curve for labor look like? One possibility is that over some range of labor hours supplied, the substitution effect will dominate. Because the marginal utility of leisure is relatively low when little labor is supplied (that is, when most time is devoted to leisure), it takes only a small increase in wages to induce the individual to substitute more labor for less leisure. Further, because few hours are worked, the income effect of those wage changes will be small.
How does substitution affect labor supply?
The individual will continue to make the substitution until the two sides of the equation are again equal. For a worker, the substitution effect of a wage increase always reduces the amount of leisure time consumed and increases the amount of time spent working. A higher wage thus produces a positive substitution effect on labor supply.
What is demand for labor?
The demand for labor is one determinant of the equilibrium wage and equilibrium quantity of labor in a perfectly competitive market. The supply of labor, of course, is the other. Economists think of the supply of labor as a problem in which individuals weigh the opportunity cost of various activities that can fill an available amount ...
How many units of utility is $1 worth of leisure?
Then MULe / W equals 20/10, or 2. That means that the individual gains 2 units of utility by spending an additional $1 worth of time on leisure. For a person facing a wage of $10 per hour, $1 worth of leisure would be the equivalent of 6 minutes of leisure time.
How does the demand for leisure play a role in understanding the supply of labor?
Two aspects of the demand for leisure play a key role in understanding the supply of labor. First, leisure is a normal good. All other things unchanged, an increase in income will increase the demand for leisure. Second, the opportunity cost or “price” of leisure is the wage an individual can earn. A worker who can earn $10 per hour gives up $10 in income by consuming an extra hour of leisure. The $10 wage is thus the price of an hour of leisure. A worker who can earn $20 an hour faces a higher price of leisure.
Why do labor organizations oppose immigration?
Labor organizations have generally opposed increases in immigration because their leaders fear that the increased number of workers will shift the supply curve for labor to the right and put downward pressure on wages.
What is the demand curve for labor?
The demand curve for labor is downward sloping
Where does demand for labor come from?
Demand for labor is derived from the firm's output choice
What is the effect of wage rate?
The wage rate. Causes a worker to supply a larger quantity of labor, and the income effect causes a worker to supply a smaller quantity of labor. As the wage increases, the opportunity cost of leisure increases, causing individuals to devote more time to working.
What happens to the opportunity cost of leisure as the wage increases?
As the wage increases, the opportunity cost of leisure increases, causing individuals to devote more time to working
Is the marginal product of a baseball player greater than the marginal product of a college professor?
No . The marginal product of a baseball player is much greater than the marginal product of a college professor.