In labor markets, a change in wages has both an income and a substitution effect

Question

In labor markets, a change in wages has both an income and a substitution effect. An increase in wages causes an increase in real income; at the same time, the relative price of leisure increases for the worker. Supposse that an increase in the wage rate causes an individual to work less. In this case, which effect dominates the other, the substitution or the income effect? (Hint: Think about the impact that each effect has on the quantity- hours of work and compare. The net effect substitution effect plus income effect on working hours is negative).

Thank You

Explanation / Answer

Here, the substitution effect will be more powerful quite simply because of common math. if the wages per hour increase, but the person stops working...his wages will remain the same or decrease. the income effect only occurs when the overall income, not income per hour, increases. therefore, income effect will occur slightly if at all whereas the person will suffer the full blow of the substitution effect the wiki page i read to understand this: http://en.wikipedia.org/wiki/Substitution_effect#Substitution_effect although I'm not sure how much the charts will help, i figure its best to give them to you anyways, just in case the answer isnt enough

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