Question

With the basic income-leisure choice model, show possible labor supply curve for the followings.

a. The poor who are at a minimum subsistence and who aspire to middle-class consumption patterns.

b. “workaholics” who have strong preferences for labor market work.

c. The wealthy who aspire to be idle rich.

d. Workers who are reluctant to change their work hours

Answer 1

a. In this case, the individual will prefer to work more when he is offered more wage rate. This is because he intends to raise his living standards. Thus, his labor supply curve is upward sloping.

b. The workaholics will also have upward sloping labour supply curve. This is because they will always want to work more at more wage rate and will not substitute work for leisure.

c. The wealthy will have a backward bending labor supply curve. This is because they will work more till the time they reach a desired level of income. After that, they will start substituting their work for leisure to remain idle.

d. Workers who are reluctant to change their work hours will have a vertical straight line labkr supply curve. This is because whatever the wage rate, they would want to work for the same number of hours.