If you know that the substitution effect dominates the income effect when Jasper's wage rises,you can tell that his labor supply curve is
A) upward-sloping.
B) downward-sloping.
C) vertical.
D) upward-sloping at an increasing rate.
E) downward-sloping at an increasing rate.

Question

Quizplus · Accepted Answer

The substitution effect refers to the tendency for workers to increase their hours of work when their wage increases, as the opportunity cost of leisure time becomes more expensive relative to the wage. Therefore, an upward-sloping labor supply curve indicates that Jasper is willing to supply more labor as his wage increases.

If You Know That the Substitution Effect Dominates the Income