Practicing Success

Target Exam

CUET

Subject

Economics

Chapter

Micro Economics: Market Equilibrium

Question:

From the following due to which reason with increase in wage rate, labour supply curve is backward bending.
i. Increase in opportunity cost of labour.
ii. Increase in purchasing power leading to desire to spend it on leisure activities
iii. Decrease in purchasing power.
iv. Increase in opportunity cost of leisure

Options:

ii, iv

i, ii, iii

i,iii, iv

iv

Correct Answer:

ii, iv

Explanation:

First, due to the increase in wage rate, the opportunity cost of leisure increases which makes leisure costlier. Therefore, the individual will want to enjoy less leisure. As a result, they will work for longer hours. Second, because of the increase in wage rate, the purchasing power of the individual increases. So, he would want to spend more on leisure activities.