Answer to Question #129559 in Microeconomics for Nomveliso

Question

Use a graph to illustrate and explain the individual supply of labour curve. In your answer, describe the forces that determine the form (shape) of the individual supply of labour curve

Answer 1

Suppose the wages offered are very low. In this case, the supply of labor increases with a decrease in wages and decreases with its growth. This paradox is explained by the fact that low wages mean low incomes, which are barely enough to carry out mandatory expenses and maintain status (I)

If wages are made more, then a person will work less, however, a decrease in employment and an increase in income lead to a person having sufficient free time, as well as a desire to have money. At some point, as wages rise, the decrease in the need to work to maintain income will equalize the increase in the desire to work. Thus, the labor supply curve will become vertical, and the supply will become completely inelastic. (Section II.)

Further growth in wages will lead to the fact that the desire to work will prevail over the diminishing need to work. Those. with an increase in wages, the consumer will agree to work more in order to acquire more benefits, in other words, he exchanges his rest time for other benefits. In this part (III) of the graph, the labor supply grows with the growth of wages, and the graph itself has a positive slope.

After that, an increase in wages will again lead to a decrease in the supply of labor by an individual, since the available level of income is more than enough for the person in question, and rest begins to have much greater marginal utility than other benefits. In this section (V), the supply curve will again have a negative slope. Finally, there will be such a situation that a person has sufficient income and free time. As a result, the supply curve will become almost vertical. (Section VI)