Figure 14.1.2
-Refer to Figure 14.1.2 above. Which of these two effects prevails in the backward bending portion of the supply curve?
A) The income effect
B) The substitution effect
C) The leisure effect
D) The wage effect

Question

Figure 14.1.2
-Refer to Figure 14.1.2 above. Which of these two effects prevails in the backward bending portion of the supply curve?
A) The income effect 
B) The substitution effect 
C) The leisure effect 
D) The wage effect

Quizplus · Accepted Answer

The income effect prevails in the backward bending portion of the supply curve for labor. This occurs because as wages increase, workers may choose to work less, valuing leisure time more than the additional income from working extra hours.

Figure 14.1.2 -Refer to Figure 14.1.2 Above. Which of These Two Effects