Supply of labour The supply of labour is the amount people are willing to work for a firm/industry at a given wage. Below is a labour supply curve. Notice that it slopes upwards, like the normal supply curve for a while, before bending backwards after a certain point. To understand why the curve slopes backwards, we must understand what influences it. Income effect The income effect is initially positive - as wages go up, people work more in order to reach a desired or target income, so the supply curve slopes upwards. However, at a certain point, the income effect turns negative as when people reach that desired income they choose to work less as wages increase, instead spending more time on leisure. Substitution effect As wages go up, the opportunity cost of not working (leisure) also goes up. This means that every hour not worked costs a worker more at a higher wage. Initial...