At relatively low wage rates the ____________ outweighs the ____________.

Question

Quizplus · Accepted Answer

At relatively low wage rates, the substitution effect outweighs the income effect. This means that as wage rates decrease, individuals are more likely to substitute leisure time for work because the opportunity cost of the leisure time becomes lower. As a result, the quantity of labor supplied decreases (substitution effect), which outweighs the increased purchasing power of the lower wages (income effect).

At Relatively Low Wage Rates the ____________ Outweighs the ____________

At Relatively Low Wage Rates the Outweighs the