Question

The supply curves for goods and services are almost universally upward sloping. How is it that labor supply can be downward sloping in certain cases?

Answer 1

The supply curve of the goods and services is mostly upward sloping because of the law of supply which states that there is direct relationship between the price and quantity supplied assuming the other than price factors to remain constant. Hence this is the reason for the positive slope of the supply curve.

But the labor supply curve tends to slope downward in some cases. This is because when the wage rate is high in the market the income of the labor increases and they earn higher incomes than before. Now since they are earning more now they tend to spend some amount of income in the leisure activities and afterwards they start working less and spend more time in the leisure activities hence the supply of the labor decreases in some cases due to the increase in the wage rate. At higher wage and income levels the increase in income that can be obtained by working more in response to a higher wage typically becomes less valuable than the leisure that is foregone. A wage level will be reached beyond which workers will do less work for higher wages because they can maintain the same satisfaction as before, or even increase it, with less work effort.

Thus giving the negative or the downward slope of the labor supply curve.