The consumer with the preferences shown to the right wil have a backward bending labor supply curve. When the wage increases from W to W' the number of hours supplied falls to 45 and the number of hours spent in leisure activities increases to 35

    For this consumer leisure is a luxury good, so much so that then income effect is stronger than the substitution effect, causing her work less as her wage increases. Notice however that she still earns more than before because of the higher wage.


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