The Combined Effect (Both Income and Substitution)of a Wage Increase

question 264

Multiple Choice

The combined effect (both income and substitution) of a wage increase is that

• A)the substitution effect always dominates, leading to more work at a higher wage.
• B)the income effect always dominates, leading to less work at a higher wage.
• C)if the substitution effect outweighs the income effect, the labor supply curve slopes upward, but if the income effect outweighs the substitution effect, the labor supply curve is backward bending.
• D)if the substitution effect outweighs the income effect, the labor supply curve is backward bending, but if the income effect outweighs the substitution effect, the labor supply curve slopes upward.

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Definitions:

Sales

Sales refer to the total amount of goods or services sold by a company, and is a primary source of revenue in a business's income statement.

Production Jobs

Positions or roles focused on creating goods or managing the production process within a manufacturing or production environment.

Profit

The financial gain achieved when revenues generated from business activities exceed the expenses, costs, and taxes associated with sustaining the business.

Work in Process

Goods that are in the production process but are not yet completed, reflecting a stage between raw materials and finished goods.