Question

"An increase in the wage rate always leads to an increase in the number of hours worked." Is this statement true or false? Draw as many diagrams as necessary and explain.

Answer 1

False.

Exceptions to the Law of supply. Y У A SI wi Wages w S M M x Labour Howest

The backward sloping supply curve of labour is an exception to the basic law of supply. It means that after a worker starts getting a certain decent/high level of wages, beyond that they prefer more of leisure time (non-paid time) over their working hours (paid time) which leads to the backward slope of the supply curve. At this point even an offer for more higher wages will not induce the labourer to work for more hours. Thus, an increase in the wage rate does not always necessarily lead to an increase in the number of working hours.