Question

Draw the indifference curve for someone deciding how to allocate time between work and leisure. What will be the shape of labour supply curve?

Answer 1

When a person spends much of their time at work in order to increase their consumption, they will get less time for leisure. The shape of the labor supply curve is, therefore, a downward sloping curve that is convex to the origin. In the case of a wage increase, it will have both an income effect and a substitution effect.