A person may decide to work fewer hours as his or her wage increases (i.e., the labor supply need not always slope upwards).

Question

Quizplus · Accepted Answer

This phenomenon is known as the "income effect" and can occur for a variety of reasons, such as an increase in the opportunity cost of leisure time or a desire to maintain a certain quality of life despite earning more money. As a result, labor supply may curve backwards at higher wages.

A Person May Decide to Work Fewer Hours as His