In the Upward-Sloping Portion of the Individual Labor-Supply Curve, the Substitution

question 231

Multiple Choice

In the upward-sloping portion of the individual labor-supply curve, the substitution effect is

• A)greater than the income effect.
• B)less than the income effect.
• C)equal to the income effect.
• D)exactly offset by the income effect.

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Definitions:

Market Demand Curve

The market demand curve represents the total quantity of a good or service that all consumers in a market are willing to purchase at various prices.

Quantity Demanded

Quantity demanded refers to the amount of a good or service consumers are willing and able to purchase at a given price.

Income

The financial gains, typically recurring, from employment or returns on investments.

Normal Good

A type of good for which demand increases as the income of consumers increases, reflecting a direct relationship between income and demand.