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

Question

Quizplus · Accepted Answer

The substitution effect from an increase in wages leads to individuals desiring to consume less leisure and work more hours, as the opportunity cost of leisure (the forgone wages from not working) increases. Therefore, the answer is B.

The Substitution Effect from an Increase in Wages Is Manifest