The income effect of a higher wage rate results in a I. higher income as people work more.
II) person choosing to decrease work hours as income increases.
III) backward-bending labor supply curve.

Question

Quizplus · Accepted Answer

The income effect suggests that as wages increase, individuals may choose to work fewer hours because they can maintain the same standard of living with less work. This can lead to a backward-bending labor supply curve, where higher wages result in less labor supplied.

The Income Effect of a Higher Wage Rate Results in a I