Which statement is true?

Question

Quizplus · Accepted Answer

As income rises, the substitution effect initially outweighs the income effect, meaning that people are willing to work more to earn more. However, at a certain point, the income effect overtakes the substitution effect and people may start reducing their work hours despite the higher pay. This is the phenomenon of the "backward bending" supply curve. Option A is not true for everyone, as some may be willing to work more than 48 hours for higher pay. Option C is incorrect because the income effect does eventually become greater than the substitution effect. Option D is also incorrect as the backward bending supply curve is a well-documented phenomenon in labor economics.

Which Statement Is True