BACKWARD-BENDING LABOR SUPPLY CURVE: A labor supply curve that is positively-sloped for relatively small quantities of labor and negatively-sloped for relatively large quantities of labor. In other words, workers supply larger quantities of labor in response to a higher wage when the wage is relatively low. However, when the wage reaches a relatively high level, further increases in the wage entice workers to reduce the quantity supplied. The supply curve thus bends back on itself. The reason for the negatively-sloped, backward-bending segment rests with the tradeoff between labor and leisure. Workers decide to "spend" a portion of their higher wage "buying" more leisure time, and thus working less. The end result is that the higher wage decreases the quantity of labor supplied. See also | labor | supply curve | labor-leisure tradeoff | leisure | income effect | normal good |
