Explain why the labor supply curve is positively sloped. Explain why l

Explain why the labor supply curve is positively sloped. Explain why labor demand is downward sloping.

What will be an ideal response?

ANSWER

It is assumed that additional labor is supplied at higher real wage rates. At a higher real wage rate, the price of leisure is greater in terms of foregone income. Along the labor demand curve, the real wage is equal to the marginal product of labor. Because of diminishing marginal returns, the marginal product of labor falls as the quantity of labor rises, so the real wage must also fall as the quantity of labor rises.