[amp_mcq option1=”only in inflationary conditions” option2=”wherever income effect overcomes substitution effect” option3=”only in labour intensive industry” option4=”only in a high cost industry” correct=”option2″]<\/p>\n
The correct answer is: B. wherever income effect overcomes substitution effect.<\/p>\n
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.<\/p>\n
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.<\/p>\n
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.<\/p>\n
Here is a brief explanation of each option:<\/p>\n
[amp_mcq option1=”only in inflationary conditions” option2=”wherever income effect overcomes substitution effect” option3=”only in labour intensive industry” option4=”only in a high cost industry” correct=”option2″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[],"class_list":["post-54173","post","type-post","status-publish","format-standard","hentry","category-economics","no-featured-image-padding"],"yoast_head":"\n