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Questions
Discuss how the supply of labour is an exception to the law of supply. Justify the statement using a diagram.
Discuss how supply of labour is an exception to the law of supply.
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Solution
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; therefore, he chooses leisure over work.
The product’s supply is OQ when the price is OP, but it drops to OQ1 when the price reaches OP1. Consequently, beyond point T, the supply curve slopes negatively.
