Question

Sam has two jobs , one for the winter and one for the summer. In the winter, he works as a lift attendant at a ski resort where he earns $11 per hour. During the summer, he drives a tour bus around the ski resort, earning $13 per hour. If Sam takes fewer hours of leisure in the winter than in the summer, we can assume that his labor supply curve is vertical. is entirely upward sloping. is horizontal. has a backward-sloping portion.

Answer 1

Sam's labor supply curve is vertical because, with differing wage rates between his winter and summer jobs, he adjusts the quantity of labor supplied by choosing to work more hours in the season with the higher hourly wage.

Step-by-step explanation:

A vertical labor supply curve implies that the quantity of labor supplied remains constant regardless of changes in the wage rate. However, in Sam's case, his labor supply curve is vertical because he chooses to work more hours in the summer when the wage rate is higher ($13 per hour) compared to the winter ($11 per hour). The vertical curve indicates that the wage rate is the primary factor influencing his decision to work more hours rather than the quantity of leisure.

When the wage rate increases, individuals might decide to work more hours to maximize their income, especially when facing seasonal job variations. In Sam's situation, the summer job offers a higher wage rate, making it more attractive for him to allocate more hours to work during that season.

The vertical slope signifies that Sam's labor supply is responsive to changes in wage rates but not to changes in the quantity of leisure. This illustrates the economic principle that individuals make labor supply decisions based on the relative attractiveness of different job opportunities.

Answer 2

Sam's labor supply curve has a backward-sloping portion because he works more hours during the winter at a lower wage rate, indicative of valuing his leisure less when his wage is lower.

Step-by-step explanation:

Given the information that Sam works fewer hours of leisure in winter than in summer, despite earning a lower wage in winter, it suggests that his labor supply curve has a backward-sloping portion. This is because at lower wages (like his wintertime job), you would expect Sam to work fewer hours (take more leisure), yet he does the opposite and takes less leisure when his wage is lower. The backward-bending supply curve reflects situations where individuals have a higher wage and can afford to work fewer hours, such as in Sam's summer job. This scenario is in contrast with the upward-sloping portion of the labor supply curve where higher wages would normally lead to an increase in the quantity of labor supplied. Yet, as wages increase further, people may opt for more leisure time, thus working fewer hours, resulting in the top portion of the backward-bending curve.