What determines the quantity of labor that people want to supply?
The simplest answer is: the REAL WAGE, the quantity of goods you get for an hour of work. Just mechanically apply the law of supply to labor, and discover that the higher the “price” of labor, the more labor people want to sell. This is known as the substitution effect. • But there is a major complication: Normally, sellers of a good consume at most a tiny amount of their own product. Orange growers, for example, spend less than 1% of their income on oranges. However, sellers of labor consume an ENORMOUS amount of their own product; even the most extreme workaholic consumes 50% of his own hours in leisure. • Why is this important? An increase in the price of what you sell makes you richer, enabling you to afford more of everything. If you already consume a lot of what you sell, then as the price of your product rises, your tendency to buy more of everything (including your own product) as you get richer may overpower your tendency to sell more of your product as its price rises. This i
