Exhibit 12-1
-Along which part of the labor supply curve in Exhibit 12-1 does the income effect of a wage change outweigh the substitution effect?

Question

Exhibit 12-1 
-Along which part of the labor supply curve in Exhibit 12-1 does the income effect of a wage change outweigh the substitution effect?

Quizplus · Accepted Answer

The income effect outweighs the substitution effect when higher wages lead to fewer hours worked, which typically occurs on the backward-bending portion of the labor supply curve, often represented between points c and d.

Exhibit 12-1 -Along Which Part of the Labor Supply Curve in Exhibit