The upward sloping portion of the supply curve for labor implies that
A)higher wages lead to an increase in hours of work supplied.
B)the law of diminishing returns has settled in.
C)higher wages lead to fewer hours of work supplied.
D)a minimum wage law is in effect.

Question

Quizplus · Accepted Answer

The upward sloping portion of the supply curve for labor is known as the "substitution effect." It means that as wages increase, individuals are more likely to supply more hours of work because the opportunity cost of their leisure time is higher. Therefore, higher wages lead to an increase in hours of work supplied.

The Upward Sloping Portion of the Supply Curve for Labor