Question

14 Question a point) 1st attempt The backward-bending labor supply curve has its shape because, at Choose one: O A.all wages, the income effect dominates the substitution effect O B.low wages, the substitution effect dominates the income effect, but the reverse occurs at high wages. 0 Call wages, the substitution effect dominates the income effect. O D.low wages, the income effect dominates the substitution effect, but the reverse occurs at high wages. O E. high wages, the substitution effect dominates the income effect, but the reverse occurs at low wages. COMPLETED SUBMIT ANSWER

Answer 1

Answer to question number 14 is option B. The shape of the backward bending supply curve is due to the fact that when wages at low substitution effect dominates the income effect and Labour supply is upward sloping. When wage rate is higher, workers might not be willing to work as much as they were feeling before and so this apply last level which indicates that Income effect dominates substitution effect.

Answer to question number 15 is option C. According to the equal marginal principle if the price of one factor increases then its marginal productivity per dollar decreases and so it should be less used while the other inputs should be used because the marginal productivity of that input per dollar is relatively higher.

Now is price of labour which is the wage rate increases we expect that label is now less productive so it would be replaced by capital.