Assertion (A): At high wage rates, a rise in the wage rate may lead an individual to supply less labour.
Reason (R): A rise in the wage rate raises the purchasing power of the individual, so she wants to spend more on leisure activities.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Both (A) and (R) are true and (R) is the correct explanation of (A).
A rise in the wage has two effects. Leisure becomes costlier, so a worker may work more. But she is also richer, so she may want more leisure. At high wages the second effect wins.
Assertion (A): At high wage rates, a rise in the wage rate may lead an individual to supply less labour. — True. At high wage rates, a further rise in the wage can make a person work fewer hours. This is why the individual labour supply curve bends backward.
Reason (R): A rise in the wage rate raises the purchasing power of the individual, so she wants to spend more on leisure activities. — True. A higher wage raises purchasing power, so she wants to spend more on leisure.
Why R explains A?
More leisure means fewer hours of work. At high wages this income effect is stronger than the pull of costlier leisure. So R is the cause of what A describes.
NCERT (2026-27): “Wage Determination in Labour Market … 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. The final effect of the increase in wage rate will depend on which of the two effects predominates. At low wage rates, the first effect dominates the second and so the individual will be willing to supply more labour with an increase in wage rate. But at high wage rates, the second effect dominates the first and the individual will be willing to supply less labour for every increase in wage rate.” |