Question

Ibrahim works as a mechanic and earns ₹ 5000 per month. To increase his family income, his wife and parents also begin to work. Over a period of time when his income increases to ₹ 20,000, Ibrahim asks his family members not to work and enjoy leisure.

The phenomenon indicated in this situation does not conform to the Law of Supply. Give a reason to support this statement. Draw the supply curve based on the given situation.

Answer 1

Here is the labour supply curve that bends backward in this case. At first, as income rises, the number of people willing to work increases. When wages go up, more workers are available, but when wages rise further, the supply curve turns backward, showing that as income rises, fewer workers are available. However, after a certain level (20,000), the quantity of workers goes down because Ibrahim tells his family to stop working and have fun. This shows that, contrary to the law of supply, higher pay can make fewer people willing to work.