Refer to the following graphs to answer the following questions:
A.
B.
C.
D.
E.
-Which graph shows the substitution effect dominating the income effect of higher wages?
A) Graph A
B) Graph B
C) Graph C
D) Graph D
E) Graph E

Question

Refer to the following graphs to answer the following questions:
A.  
B.
C. 
D.
E.
-Which graph shows the substitution effect dominating the income effect of higher wages?
A) Graph A 
B) Graph B 
C) Graph C 
D) Graph D 
E) Graph E

Quizplus · Accepted Answer

In graph A, the labor supply increases as wages increase, showing a positively sloped labor supply curve. This suggests that the substitution effect is dominating, as individuals are substituting leisure time for work due to the higher wages, resulting in an increase in labor supply. In contrast, a negatively sloped labor supply curve (as seen in graphs B, C, D, and E) would suggest that the income effect is dominating, as individuals are valuing the increased income more than their leisure time and are therefore working more.

Refer to the Following Graphs to Answer the Following Questions