In the United States, because men on average earn more than women, the substitution effect tends to outweigh the income affect when wages increase.

Question

Quizplus · Accepted Answer

The substitution effect and the income effect relate to how individuals respond to changes in wages, with the substitution effect suggesting that higher wages encourage more work (substituting labor for leisure) and the income effect suggesting that higher wages allow individuals to work less and still maintain their standard of living. The statement incorrectly generalizes the impact of these effects based on gender wage disparities. The balance between these effects varies by individual preferences, job characteristics, and wage levels, not directly by the average earnings difference between genders.

In the United States, Because Men on Average Earn More