In the Wage labor households model,if the household has a higher hourly wage,labor supply will ________.

Question

Quizplus · Accepted Answer

The effect of a higher hourly wage on labor supply is ambiguous because it involves two opposing effects: the substitution effect, which might lead to an increase in labor supply as work becomes relatively more rewarding compared to leisure, and the income effect, which might lead to a decrease in labor supply as individuals can achieve the same income level with fewer hours worked.

In the Wage Labor Households Model,if the Household Has a Higher