If for a given individual, between a wage rate of $20 and $25 the ______________

Question

If for a given individual, between a wage rate of $20 and $25 the ____________________ effect outweighs the ________________ effect, the individual's supply curve of labor curve between those two wages will be _________________.

substitution; income; vertical

substitution; income; upward sloping

substitution; income; downward sloping

income; substitution; vertical

?income; substitution; upward sloping

a.

substitution; income; vertical

b.

substitution; income; upward sloping

c.

substitution; income; downward sloping

d.

income; substitution; vertical

e.

?income; substitution; upward sloping

Explanation / Answer

The susbstitution effect of the wage increase is the people will ready to work more hours becuase there is more reward available. And here the leisure become more expensive, the income effect is , people give up the working time and enjoy more leisure time. This is because they can achieve the target income by working less hours. So if the substitution effect dominates people will work for more hours and give up the leisure time. And here the labour supply curve will be upward sloping.

ANS: B) Substitution;income; upward sloping.

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