The substitution effect from an increase in wages is evident in a
A)decrease in labor demand.
B)desire to consume less leisure.
C)desire to consume more leisure.
D)backward-bending labor supply curve.

Question

Quizplus · Accepted Answer

The substitution effect occurs when a higher wage rate increases the opportunity cost of leisure time, making individuals more likely to work more hours and have less leisure time. Therefore, a desire to consume less leisure is a manifestation of the substitution effect.

The Substitution Effect from an Increase in Wages Is Evident