If an individual's labor supply curve is downward sloping, this indicates that:
A) the individual has become wealthier.
B) the income effect dominates the substitution effect.
C) the substitution effect dominates the income effect.
D) the individual faces a diminishing marginal utility for leisure.

Question

Quizplus · Accepted Answer

A downward sloping labor supply curve suggests that as wages increase, the individual chooses to work less, indicating that the income effect (desire for more leisure as income rises) is stronger than the substitution effect (incentive to work more due to higher wages).

If an Individual's Labor Supply Curve Is Downward Sloping, This