Statistical studies in the United States have reached the conclusion that for low-income workers
A)the substitution effect is greater than the income effect.
B)the income effect is greater than the substitution effect.
C)the income effect is about equal to the substitution effect.
D)the substitution effect is of the "wrong" sign.

Question

Quizplus · Accepted Answer

The substitution effect tends to be greater than the income effect for low-income workers because as wages increase, they are more likely to substitute labor for leisure (i.e., work more hours) due to the higher opportunity cost of not working.

Statistical Studies in the United States Have Reached the Conclusion