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leisure is 16.
At a wage of W2,
leisure is 12.
We have a downward sloping
demand for leisure, standard
downward sloping demand
for leisure.
But we can convert that to a
supply of labor, which is what
we care about.
Nobody cares about the demand
for leisure curve.
We care about the supply
of labor curve.
You just subtract
these from 24.
You use the supply of labor
curve which is upward sloping.
So as long as substitution
effects dominate income
effects, we'll get an upward
sloping labor supply curve.
But it's certainly possible
that if income effects
dominates substitution effects,
you could get a
downward sloping supply curve,
if you will, what we call in
labor economics, a
backward-bending supply curve,
a supply curve that goes
the wrong way.
Instead of sloping up like
supply curves are supposed to,
it goes the wrong way
and slopes down.
And we can see that's
plausible.
The target income case I
just described to you
would deliver that.
The target income case I just
described to you would deliver
a downward sloping
supply of labor.
As the wage rose, people would
work less and less.
That's a totally
plausible case.
And that's why income and
substitution effects are
interesting.
Because they can deliver
this weird result.
They can get the wrong
signed supply curve.
Questions about income
and substitution
effects or labor supply?
So what I want to spend the
rest of the lecture on is
talking about well,
what is the case?
Do labor supply curves
slope up or down?