The _____ effect on labor supply occurs when workers supply more labor at higher wages because the opportunity cost of leisure increases.
A) income
B) substitution
C) complementary
D) elasticity

Question

Quizplus · Accepted Answer

The substitution effect occurs when workers decide to work more hours at higher wages because the opportunity cost of leisure (time not working) increases, making leisure relatively more expensive compared to the income that could be earned by working additional hours.

The _____ Effect on Labor Supply Occurs When Workers Supply