If the wealth effect of an increase in the real wage was greater than the substitution effect of an increase in the real wage
A)the labor supply curve would slope upward.
B)the labor supply curve would slope downward.
C)the labor supply curve would be vertical.
D)the labor demand curve would solely determine the real wage.

Question

Quizplus · Accepted Answer

When the wealth effect of an increase in the real wage outweighs the substitution effect, individuals may choose to work less because they can maintain their standard of living with fewer hours worked. This leads to a backward-bending labor supply curve, indicating that the labor supply curve would slope downward at higher wage rates.

If the Wealth Effect of an Increase in the Real