The labor supply could decrease when wages increase only if the:

Question

Quizplus · Accepted Answer

According to the law of demand, the quantity demanded decreases as the price increases. In the case of labor supply, when wages increase, the price effect (which suggests that individuals are willing to supply more labor at higher wages) is countered by the income effect (which suggests that individuals may work fewer hours as they can maintain their standard of living with higher wages). If the income effect outweighs the price effect, then the labor supply would decrease when wages increase.

The Labor Supply Could Decrease When Wages Increase Only If