If the substitution effect of a wage change outweighs the income effect of a wage change, the labor-supply curve is
A) upward sloping.
B) horizontal.
C) vertical.
D) backward bending.

Question

Quizplus · Accepted Answer

When the substitution effect of a wage change outweighs the income effect, it means that as wages increase, individuals are more inclined to substitute leisure for labor because the opportunity cost of leisure increases. This leads to an increase in the quantity of labor supplied as wages rise, which is represented by an upward sloping labor-supply curve.

If the Substitution Effect of a Wage Change Outweighs the Income