Backward-bending labour supply curve
Also called: Backward-bending supply curve of labour · Topic: Factors of Production, Entrepreneurship and Startups · NCERT: Class 12, Ch 5 "Market Equilibrium"
Meaning
This curve shows that one person's labour supply does not always rise with the wage. A wage rise has two effects. The substitution effect makes leisure costlier, so the person works more. The income effect makes the person richer, so they may want more leisure and work less. At low wages the substitution effect wins, so hours worked rise. At high wages the income effect wins, so hours worked fall, and the curve bends backward.
Example
A delivery rider earning ₹100 an hour may add hours when pay rises to ₹150. A senior surgeon earning ₹20,000 an hour may cut hours when pay rises further, because they already earn enough and want more free time.
Don't confuse with
- Market supply of labour: this still slopes upward. Higher wages draw new workers into the market, even if some existing workers cut their hours.
Related concepts
- Derived demand
- Demand for labour
- Marginal revenue product of labour
- Value of marginal product of labour
- Labour market
- Supply of labour
- Income-leisure trade-off
- Equilibrium wage rate
- Wage rate