Answer to Question #95920 in Macroeconomics for Maryum

Question

What is the effect of backward bending supply curve on output employment and real wages

Answer 1

 

           Effect of Backward Bending Supply Curve on Output Employment and Real Wages

Backward bending  supply curve is caused by  increased wages which in turn lead to declined labor supply. The bend is as a result of the determinants of supply which are substitution effect and income effect. The substitution effect depicts that increased wages render work more pleasing than leisure. On the other hand, the income effect says that increased wage leads to workers achieving their targets income within few working hours. Therefore, the backward bending supply curve will have a negative effect on the output employment since it leads to decreased labor supply. On the contrast, the backward bending supply curve will have a positive impact on the real wages because they tend to increase.

Reference

Tejvan Pettinger ;https://www.economicshelp.org/blog/glossary/backward-bending-supply/ >November 12,2017