With reference to the market supply of labour, consider the following statements: 1. It is obtained by aggregating individual labour supply curves. 2. It is always backward bending like the individual supply curve. 3. It is generally upward sloping as higher wages attract more people to the workforce. Which of the statements given above is/are correct?

The correct option is 1 and 3 only. Explanation The supply of labour represents the amount of labour (usually measured in hours) that workers are willing to offer at different wage rates. It is analyzed at both the individual level and the aggregate (market) level. - Statement 1 is Correct: The market supply of labour is derived by aggregating (horizontally summing) the individual labour supply curves of all workers in the economy. It reflects the total number of work hours supplied by all individuals at a specific wage rate. - Statement 2 is Incorrect: An individual labour supply curve is often depicted as "backward-bending." At high wage levels, the income effect (desire for leisure due to higher income) may dominate the substitution effect (opportunity cost of leisure), causing an individual to work less as wages rise. However, the market supply curve is not "always" backward-bending. In most contexts, the aggregate curve remains upward sloping because individual thresholds for entering the workforce vary. - Statement 3 is Correct: The market supply curve for labour is generally upward sloping. As wages increase, two effects occur: existing workers may increase their hours (substitution effect), and crucially, new individuals are attracted to enter the workforce (extensive margin). This influx of new entrants ensures that the total quantity of labour supplied increases with the wage rate, preventing the aggregate curve from bending backward in typical market scenarios. Key Takeaway: While individual labour supply curves can bend backward due to the income effect at high wages, the market labour supply curve is generally upward sloping because higher wages induce new workers to join the labour force.

With reference to the market supply of… - NCERT Class 12 Economics MCQ

NCERT Class 12 Economics — Chapter 2: Market Equilibrium

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With reference to the market supply of labour, consider the following statements:

It is obtained by aggregating individual labour supply curves.
It is always backward bending like the individual supply curve.
It is generally upward sloping as higher wages attract more people to the workforce.

Which of the statements given above is/are correct?

NCERT textbook question

From NCERT Introductory Microeconomics · Page 76

Options

A1 only
B1 and 3 only
C2 only
D1, 2 and 3

Did you get this right?

Solution

The correct option is 1 and 3 only.

Explanation

The supply of labour represents the amount of labour (usually measured in hours) that workers are willing to offer at different wage rates. It is analyzed at both the individual level and the aggregate (market) level.

Statement 1 is Correct: The market supply of labour is derived by aggregating (horizontally summing) the individual labour supply curves of all workers in the economy. It reflects the total number of work hours supplied by all individuals at a specific wage rate.
Statement 2 is Incorrect: An individual labour supply curve is often depicted as "backward-bending." At high wage levels, the income effect (desire for leisure due to higher income) may dominate the substitution effect (opportunity cost of leisure), causing an individual to work less as wages rise. However, the market supply curve is not "always" backward-bending. In most contexts, the aggregate curve remains upward sloping because individual thresholds for entering the workforce vary.
Statement 3 is Correct: The market supply curve for labour is generally upward sloping. As wages increase, two effects occur: existing workers may increase their hours (substitution effect), and crucially, new individuals are attracted to enter the workforce (extensive margin). This influx of new entrants ensures that the total quantity of labour supplied increases with the wage rate, preventing the aggregate curve from bending backward in typical market scenarios.

Key Takeaway: While individual labour supply curves can bend backward due to the income effect at high wages, the market labour supply curve is generally upward sloping because higher wages induce new workers to join the labour force.

Your note

More from Chapter 2: Market Equilibrium

In the context of market equilibrium, what happens when the market demand curve shifts rightward while the supply curve remains unchanged ?

easy

In a market with free entry and exit, if the demand curve shifts to the left: Statements: 1. Firms will enter the market to capture the lower price. 2. The market price will temporarily fall below the minimum average cost. 3. The supply will increase until the price returns to the minimum average cost. Which of the statements given above is/are correct?

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What is the primary consequence of a price ceiling accompanied by rationing?

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With reference to the supply of labour by an individual, consider the following statements: 1. An increase in wage rate always leads to an increase in the supply of labour hours by an individual. 2. At high wage rates, the income effect may dominate the substitution effect, leading to a decrease in labour supply. 3. The individual labour supply curve can be backward bending. Which of the statements given above is/are correct?

hard

In a perfectly competitive market, if the market price is above the equilibrium price, there will be:

easy

Keep practising Chapter 2: Market Equilibrium

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