If the substitution effect of wage increases is greater than the income effect, then the individual labor supply curve is positively sloped in the short run.

Question

Quizplus · Accepted Answer

When the substitution effect of wage increases is greater than the income effect, the individual will respond to the wage increase by working more since the opportunity cost of leisure time has increased. This results in a positively sloped labor supply curve in the short run.

If the Substitution Effect of Wage Increases Is Greater Than