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The Substitution Effect in the Work-Leisure Model Induces a Person

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The substitution effect in the work-leisure model induces a person to work less in response to higher wages, which tends to make the labor-supply curve slope upward.


Definitions:

Productivity

Refers to the measure of output per unit of input.

Input Demand Curves

Graphs showing the relationship between the price of inputs and the quantity of inputs demanded by producers.

Marginal Product

The elevation in production output stemming from the addition of one unit of input.

Profit Maximization

The process or strategy where a firm adjusts its production to achieve the highest possible profit.

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