Income effect (of labour supply)

This effect is relevant to the individual labour supply curve rather the industry labour supply curve. The income effect explains the backwards bending section of the labour supply curve – above a certain wage rate, as the wage rate rises, workers can afford to work for fewer hours whilst maintaining their level of income.

© 2002-2022 Tutor2u Limited. Company Reg no: 04489574. VAT reg no 816865400.