To calculate the total hours per week and the reasons quantity supplied increases with the hourly wage and the individuals who have a backward bending supply curve and whether the market supply curve would bend backwards in the table shown below.
Concept Introduction:
Wage rates: The amount of base wage paid to a worker per hour or day or per unit of output if on piecework
Market supply curve: this is an upward sloping curve depicting the positive relationship between price and quantity supplied
Explanation of Solution
From the data given in the table, we can determine the total hours of labor hours supplied by,
| Hourly wage $ | Q1 | Q2 | Q3 | QT |
|---|---|---|---|---|
| 15 | 20 | 0 | 0 | 35 |
| 16 | 25 | 0 | 0 | 41 |
| 17 | 35 | 10 | 0 | 62 |
| 18 | 45 | 25 | 10 | 98 |
| 19 | 42 | 40 | 30 | 131 |
| 20 | 38 | 37 | 45 | 140 |
Here, the quantity supplied will tend to increase with an increase in the hourly wage because every additional unit of labor supplied will now earn more than the earlier level.
To understand the backward bending nature of labor supply, we see that the individuals Q1 and Q2will show a backward bending supply curve in the range shown as we can clearly see that with an increase in the hourly wage after a point, there is a reduction in the hours of work performed.
The market supply of labor does not show a backward bending supply curve of labor which can be assessed from the column QT.
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Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
