The income effect is thought to offset the substitution effect among very high wage earners.

Question

Quizplus · Accepted Answer

Very high wage earners may have a higher income elasticity of demand, which means that when their wages increase, they may not feel the need to substitute for cheaper goods, but rather increase their consumption of higher-priced goods and services. This can result in the income effect offsetting the substitution effect.

The Income Effect Is Thought to Offset the Substitution Effect