The correct answer is: B. wherever income effect overcomes substitution effect.
A backward-bending supply curve for labor is a situation in which the supply of labor decreases as the wage rate increases. This can happen when the income effect of a higher wage rate outweighs the substitution effect. The income effect refers to the fact that a higher wage rate will allow workers to purchase more goods and services, which will increase their utility. The substitution effect refers to the fact that a higher wage rate will make leisure more expensive relative to work, which will lead workers to substitute work for leisure.
In some cases, the income effect of a higher wage rate may be so strong that it outweighs the substitution effect, leading to a backward-bending supply curve for labor. This can happen when workers have a strong preference for leisure, or when the goods and services that workers consume are relatively expensive.
It is important to note that a backward-bending supply curve for labor is not the norm. In most cases, the substitution effect will outweigh the income effect, leading to a positive relationship between the wage rate and the quantity of labor supplied. However, it is important to be aware of the possibility of a backward-bending supply curve, as it can have important implications for economic policy.
Here is a brief explanation of each option:
- Option A: Only in inflationary conditions. This is not correct, as a backward-bending supply curve for labor can exist in any economic condition.
- Option B: Wherever income effect overcomes substitution effect. This is the correct answer, as explained above.
- Option C: Only in labour intensive industry. This is not correct, as a backward-bending supply curve for labor can exist in any industry.
- Option D: Only in a high cost industry. This is not correct, as a backward-bending supply curve for labor can exist in any industry.