The labor supply curve will be negatively sloped if the substitution effect of wages is
A)Weaker than the income effect of wages.
B)Stronger than the income effect of wages.
C)Equal to the income effect of wages.
D)Negative.

Question

Quizplus · Accepted Answer

The labor supply curve will be negatively sloped if the income effect of a wage increase (leading workers to work less because they can maintain the same standard of living with less work) outweighs the substitution effect (where higher wages make work more attractive relative to leisure, encouraging more work hours). This scenario is described in option A, where the substitution effect is weaker than the income effect.

The Labor Supply Curve Will Be Negatively Sloped If the Substitution