If an individual's supply of labor curve is positively sloped throughout,then
A)the substitution effect always dominates the income effect.
B)the income effect always dominates the substitution effect.
C)the substitution effect dominates at low real wage levels and the income effect dominates at high real wage levels.
D)the income effect dominates at low real wage levels and the substitution effect dominates at high real wage levels.

Question

Quizplus · Accepted Answer

A positively sloped labor supply curve implies that as wages increase, an individual is willing to work more hours, indicating that the substitution effect (the tendency to substitute leisure for labor when wages increase) dominates the income effect (the tendency to work less as income increases due to higher wages).

If an Individual's Supply of Labor Curve Is Positively Sloped