As the wage rate rises to extremely high levels,the ____________ becomes stronger than the ____________.

Question

Quizplus · Accepted Answer

As the wage rate rises to extremely high levels, the income effect (which refers to changes in an individual's consumption patterns due to changes in their income) becomes stronger than the substitution effect (which refers to changes in consumption patterns due to changes in relative prices of goods or services). This means that individuals may choose to work less because they can maintain their desired standard of living with fewer hours of work, outweighing the incentive to substitute leisure for labor due to higher wages.

As the Wage Rate Rises to Extremely High Levels,the ____________