A wage _____ raises the quantity of labor supplied through a strong _____ effect.
A)decrease;substitution
B)increase;substitution
C)increase;income
D)decrease;complement

Question

Quizplus · Accepted Answer

According to the law of supply, as the wage rate increases, the quantity of labor supplied also increases. This is due to the substitution effect, as workers are incentivized to work more hours at a higher wage rate. The income effect could also potentially impact the quantity of labor supplied, but it would only be a weaker effect compared to the substitution effect. Therefore, option B is the correct answer.

A Wage _____ Raises the Quantity of Labor Supplied Through