If the substitution effect from a higher wage rate exceeds the income effect, then a higher wage rate
A) decreases the quantity of labour supplied.
B) shifts the supply of labour curve leftward.
C) shifts the supply of labour curve rightward.
D) increases the quantity of labour supplied.

Question

Quizplus · Accepted Answer

The substitution effect implies that as wages increase, work becomes more attractive relative to leisure, leading individuals to supply more labor. If this effect outweighs the income effect (where higher income might lead one to work less and enjoy more leisure), the overall result is an increase in the quantity of labor supplied.

If the Substitution Effect from a Higher Wage Rate Exceeds