ECON 400 Why might the labor supply curve be backward
Why might the labor supply curve be backward bending? Show graphically considering the income and substitution effect with increasing wages.
Why might the possibility of a backward bending labor supply curve influence the effectiveness of a tax change?
In answering this question evaluate the following expression where T is the tax revenue, τ is the tax rate, H are hours worked, w is the wage
rate and is the after tax wage.