When wages increase:

Question

Quizplus · Accepted Answer

When wages increase, individuals face a higher opportunity cost of leisure time. This means that the cost of not working (i.e. the forgone wages) is now higher, so individuals are more likely to choose to work in order to take advantage of the higher wages. Therefore, the quantity of labor supplied by an individual may increase or stay the same, depending on how the individual values leisure time. However, it is unlikely that the quantity of labor supplied would decrease as a result of higher wages, which rules out option B.

When Wages Increase