Individual labour supply curve

• What specific type of labor supply are we focusing on?

  Individual labor supply
• What key choice do individuals face when deciding whether to supply their labor?

  Whether to work or pursue leisure
• How are work and leisure related in the context of individual labor supply?

  One is the opportunity cost of the other
• What two effects determine the shape of the individual labor supply curve?

  Income effect and substitution effect
• What does a positive income effect state about wages and work?

  As wages go up, people work more
• What characterizes a negative income effect?

  Working less as wages rise to reach a target income
• According to the study material, is the substitution effect always positive?

  Yes, it's always positive
• How does the substitution effect explain the relationship between wages and leisure time?

  Higher wages increase the opportunity cost of leisure
• According to the study material, what does the substitution effect state happens as wages rise?

  Incentive to work increases
• What does the end result of the income and substitution effects determine?

  The shape of the labor supply curve
• What variable is on the y-axis of the individual labor supply curve?

  Real wage
• What variable is on the x-axis of the individual labor supply curve?

  Number of hours worked
• What is the shape of the individual labor supply curve described as?

  Backward bending
• According to the study material, what does the shape of the individual labor supply curve depend on?

  The interplay of income and substitution effects
• According to the study material, what happens in the first section of the backward-bending supply curve where wages are low?

  Individuals work more as wages increase
• Why do individuals tend to work more in the first section of the labor supply curve?

  Positive income and substitution effects
• In the second section, how does increasing wages affect the number of hours worked?

  Hours worked increase at a slowing rate
• What is the effect on target income in the second section of the curve?

  Individuals are approaching their target income
• In the second section, what is the relationship between overall wage effect and wage increases?

  The overall wage effect is still positive
• In the third section of the labor supply curve, what happens as wages get very high?

  Hours worked decrease
• According to the study material, what happens to the income effect in the third section?

  The income effect becomes negative
• In the third section, why does the number of hours worked fall?

  The negative income effect dominates
• What assumption is made when explaining the backward-bending curve?

  Individuals have a target income
• According to the study material, what does reaching target income allow individuals to do?

  Devote more time to leisure
• According to the study material, what is a key point to remember about the backward bending labor supply curve?

  It only applies to individuals
• How does an individual labor supply curve differ from the supply curve for firms or the market?

  Individual curves can be backward bending
• If someone's wages increase significantly and they start working fewer hours, what effect is likely dominating?

  Negative income effect
• How do the income and substitution effects interact to create the backward-bending shape of the individual labor supply curve?

  Substitution is positive, income changes
• If an individual suddenly prioritizes family time over earning more income, which section of the labor supply curve are they likely operating in?

  The third section