Increasing wage rates will result in more hours worked.
A) True
B) False
C) Uncertain

Question

Quizplus · Accepted Answer

The relationship between increasing wage rates and hours worked is uncertain because it depends on the interplay between the substitution effect and the income effect. The substitution effect suggests that higher wages might encourage more hours worked by making leisure relatively more expensive, while the income effect suggests that higher wages might lead to fewer hours worked because individuals can maintain their standard of living while working less.

Increasing Wage Rates Will Result in More Hours Worked