Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.
PART 6 The Economics of Labor Markets
Chapter 18 of 36 The Markets for the Factors of Production
Section 13 of 20
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Per Figure A at $20 per hour wage:
When younger this person is on labor-supply curve S, desires to work 40 hours.
When close to retirement this person is on curve S1, values leisure time higher and desires to work only 25 hours
This person would work 40 hours only if wage was at least $30.
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One of the Ten Principles of Economics, #1: people face trade-offs.
Probably no trade-off is more important in a person's life than the trade-off between work and leisure.
The more hours you spend working, the fewer hours you have for leisure activities.
The trade-off between labor and leisure is key to the labor supply curve, why it slopes upward.
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Another of the Ten Principles of Economics, #2: the cost of something is what you give up to get it.
If you give up an hour of work for leisure you lose an hour of wages.
If the wage you could earn is $20 per hour, your opportunity cost of an hour of leisure is $20.
The labor supply curve reflects how workers' decisions about the labor-leisure trade-off respond to a change in that opportunity cost.
They would be willing to supply more hours of labor if the wage rate was $30 rather than $20.
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Per Figure A1 the labor supply curve need not be upward-sloping.
Imagine you got another raise from $30 to $40 per hour.
Now you can work for either 40 or 30 hours and get the same income of $120.
At the $40 wage, you might choose to work fewer hours.
Your labor supply curve would slope downward.
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workers' decisions
rōdō sha no kettei
労働者の決定
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