A worker's labor supply curve is upward sloping only if the substitution and labor income effects are in the same direction.

Question

Quizplus · Accepted Answer

The labor supply curve can be upward sloping if the substitution effect of a wage increase (working more because leisure becomes relatively more expensive) dominates the income effect (working less because one can afford to enjoy more leisure with higher income), not necessarily because they are in the same direction.

A Worker's Labor Supply Curve Is Upward Sloping Only If