Exhibit 12-9

-Rick's labor supply schedule is given in Exhibit 12-9.If the wage rate increases from $10 to $15,then:

Question

Exhibit 12-9
 
-Rick's labor supply schedule is given in Exhibit 12-9.If the wage rate increases from $10 to $15,then:

Quizplus · Accepted Answer

The substitution effect for a wage increase from $10 to $15 would be to increase the quantity of labor supplied, as the opportunity cost of leisure time has now increased. However, the income effect would also cause Rick to work less, as he now has more purchasing power and could afford to work less. Since the wage increase is relatively small, we can assume that the substitution effect dominates the income effect and he would increase his labor supply. Therefore, the supply curve would still slope upwards, but it would be flatter than before due to the income effect.

Exhibit 12-9 -Rick's Labor Supply Schedule Is Given in Exhibit 12-9.If the in Exhibit