When does a higher wage rate lead to an increase in the number of work hours supplied by laborers?

Question

Quizplus · Accepted Answer

The answer is B because the substitution effect occurs when a higher wage rate provides an incentive for workers to work more hours to increase their income. However, the income effect happens when a higher wage rate increases the worker's purchasing power allowing them to work fewer hours while still maintaining the same level of consumption. When the substitution effect outweighs the income effect, there will be an increase in the number of work hours supplied by laborers.

When Does a Higher Wage Rate Lead to an Increase