If a person supplies more hours of labor in response to a wageincrease, then a)

Question

If a person supplies more hours of labor in response to a wageincrease, then a) the income effect is greater than the substitutioneffect. b) the substitution effect is greater than the incomeeffect. c) the income effect equals the substitution effect. d) the person is not maximizing utility. If a person supplies more hours of labor in response to a wageincrease, then a) the income effect is greater than the substitutioneffect. b) the substitution effect is greater than the incomeeffect. c) the income effect equals the substitution effect. d) the person is not maximizing utility.

Explanation / Answer

I would think: a) the income effect is greater than the substitutioneffect. With more salary earned, one can increase the budgetconstraint

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