Question

You work for Walmart at an upper management position. Based on what we are learning about Resource Markets where labor is one important resource, would you work 10 hours per day for $8/hour? $12/hour? $25/hour? Does your answer show a backward-bending supply curve of your labor? Justify.

Answer 1

Ans) Labour supply curve is upward sloping because with increase in wages, opportunity cost of leisure rises and workers substitutes leisure with work. But, leisure holds a significant importance. With increase in wages, after a particular point, we see that number of hours provided by the workers start reducing and they start substituiting work with leisure. It is because now they reach their desired income in less time and are more willing to get some leisure time. Eg- after winning a lottery, person prefers taking work off.

When wages are low, people work for more time in order to achieve desired income. And also with increase in income, work hours increases. Drawing conclusion from these three arguments, we can say that 10 hour of work is more likely to be provided at the wage rate of $12 (Kindly note that, others might say that more hours of work is provided at wage rate of $8, but then, this question is more subjective than objective.)