Question

Why is the supply curve of labour backward sloping? Explain with the help of a diagram.

What does a backward-sloping supply curve indicate?

Answer 1

A section of the supply curve may occasionally slope backward. This implies that a higher price would be charged for a smaller quantity than for a lower price. The product's supply is OQ in Fig. when the price is OP, but it drops to OQ₁ when the price increases to OP₁. Consequently, beyond point T, the supply curve slopes negatively.

The labour supply, which is measured in terms of hours worked, may exhibit this kind of backward-sloping supply curve. The worker initially puts in more hours to make more money as the wage rate (price of labour) rises. He would rather work than relax. A worker may be willing to put in fewer hours at a very high wage rate in order to have more free time. The worker may have made enough money at a very high wage rate to favour leisure over labour.