Labor-Leisure Tradeoff
Work as a consumer choice: utility maximization with a time constraint, and backward-bending supply.
The Labor-Leisure Tradeoff model, in writing
Definition
Labor supply as consumer choice: utility over consumption and leisure, constrained by time and the wage, the wage is the price of leisure.
Optimum: MRS(leisure, consumption) = w; backward bend when income effect beats substitution
The intuition
A raise makes leisure pricier (work more, substitution) but also makes you richer (work less, income). At high wages the income effect can win, bending labor supply backwards, why surgeons golf on Fridays.
Exam tip
Non-labor income shifts the constraint up without changing its slope, pure income effect, hours fall.
Related models in Labor Economics