If an individual's labor supply curve is downward sloping, thisindicates that:
A)the individual has become wealthier.
B)the income effect dominates the substitution effect.(True Answer )Correct
C)the substitution effect dominates the income effect.
D)the individual faces a diminishing marginal utility for leisure.

Question

Quizplus · Accepted Answer

An individual's labor supply curve is downward sloping because the income effect dominates the substitution effect. This means that as their wages increase, they are willing to work less because they can afford more leisure time. However, if the substitution effect dominates, the individual would be willing to work more as their wages increase due to the opportunity cost of leisure becoming higher.

If an Individual's Labor Supply Curve Is Downward Sloping, Thisindicates