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

ii, iv

The correct answer is Option 1: ii, iv

The backward-bending labor supply curve occurs because at higher wage levels, workers may choose to work less and enjoy more leisure time instead of working extra hours.

• ii. Increase in purchasing power leading to desire to spend it on leisure activities ✅ (Correct)

  • As wages increase, workers earn more money, making them financially comfortable.
  • This increases their preference for leisure, leading them to reduce working hours.

• iv. Increase in opportunity cost of leisure ✅ (Correct)

  • Higher wages make leisure more expensive in terms of lost earnings, but at very high wage levels, workers prioritize leisure over extra income, leading to reduced labor supply.

Why other options are incorrect:

• i. Increase in opportunity cost of labor ❌ (Incorrect)

  • The opportunity cost of leisure, not labor, plays a role in the backward-bending curve.

• iii. Decrease in purchasing power ❌ (Incorrect)

  • Higher wages increase purchasing power, not decrease it.