The upward slope of the labor supply curve suggests that the income effect of a wage increase outweighs the substitution effect.

Question

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The upward slope of the labor supply curve suggests that the substitution effect of a wage increase, which encourages more work as wages rise, outweighs the income effect, which might lead to working less as people can maintain the same income with fewer hours.

The Upward Slope of the Labor Supply Curve Suggests That