Consider the following statements about an individual’s decision to supply labour:
(A) The decision is essentially a choice between income and leisure.
(B) A rise in the wage rate increases the opportunity cost of leisure.
(C) A rise in the wage rate reduces the purchasing power of the individual.
(D) Individuals enjoy leisure and find work irksome.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (A), (B) and (D) only
(A) The decision is essentially a choice between income and leisure. — Correct. Households choose how to split their time between work, which earns income, and leisure.
(B) A rise in the wage rate increases the opportunity cost of leisure. — Correct. An hour of leisure gives up the wage for that hour, so a higher wage makes leisure costlier.
(C) A rise in the wage rate reduces the purchasing power of the individual. — Incorrect. A higher wage raises the purchasing power of the individual, so she may want to spend more on leisure.
(D) Individuals enjoy leisure and find work irksome. — Correct. People like leisure and find work tiring or unpleasant (‘irksome’), yet they need income. This is the trade-off behind the choice.
NCERT (2026-27): “Wage Determination in Labour Market … Having explored the demand side, we now turn to the supply side. As already mentioned, it is the households which determine how much labour to supply at a given wage rate. Their supply decision is essentially a choice between income and leisure. On the one hand, individuals enjoy leisure and find work irksome and on the other, they value income for which they must work. So there is a trade-off between enjoying leisure and spending more hours for work. To derive the labour supply curve for a single individual, let us assume at some wage rate w1, the individual supplies l1 units of labour. Now suppose the wage rises to w2. This increase in wage rate will have two effects: 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 to w2, the purchasing power of the individual increases. So, she would want to spend more on leisure activities.” |