Economics (MindTap Course List)
Economics (MindTap Course List)
What do substitution and income effects have to do with the supply curve of labor?
Role of substitution and income effects on supply curve of labor.
When the wage rate increases, the labors work for more hours and the opportunity cost for leisure increases. Therefore, the labors substitute their leisure time. Thus, the supply curve of labor slopes upward. This means that the income effect is greater than the substitution effect...
Chapter 26 Solutions
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