Sometimes increases in the wage rate will cause individuals to work more hours. It is also the...

Question:

Sometimes increases in the wage rate will cause individuals to work more hours. It is also the case that this same increase could cause people to work fewer hours. Explain what is happening to cause this variance.

Labor Supply:

Aggregate labor supply could be affected through two margins. The intensive margin captures how many hours workers choose to work, and the extensive margin captures how many people choose to enter the labor force.

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When there is an increase in wage, there are two effects on labor supply. The income effect argues that since the total income is higher and leisure...

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Understanding Shifts in Labor Supply and Labor Demand

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Chapter 7 / Lesson 4
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Learn about the labor supply and demand curves in economics. Explore the labor supply and demand curve shifts, and study the factors that impact both curves.


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