Supply Of Labour

Question 1

The relationship between work and leisure is characterised as

Answer 1

Trade off

Question 2

Diagram shows

Answer 2

One individual worker’s labour supply curve and the number of hours they will work depends upon the wage rate they recieved

Question 3

As wage rises from WR1 to WR2

Answer 3

Work becomes more rewarding and the opportunity cost of leisure increases. Worker spend more of their time to work as they have more incentive to do so

Question 4

On the upward sloping portion of the supply the

Answer 4

Substitution effect dominates as the worker chooses to substitute work for leisure

Question 5

As real wage rise then

Answer 5

Ceteris paribus so do real disposable income meaning individuals gain more access to leisure which they gain more utility from

Question 6

As income rises the opportunity cost of work rises

Answer 6

When the worker reaches their target income the income effect dominates over subsitution effect

Question 7

The workers chooses to reduce their number of hours

Answer 7

As wage rate increases. Thus wage rate increases from WR2 to WR3 the worker chooses more leisure over income and the labour supply curve begins to slope backwards

Question 8

Factors that may cause the supply of labour to be more price inelastic

Answer 8

Occupational immobilty of labour
Geographical immobility of labour
A strong role for non wage incentive
A short run wage change