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:

Dominance

The exercise of power or influence over others to command, control, or prevail in a social or competitive setting.

Big Five Personality

A conceptual model that outlines human personality through five major traits: openness, conscientiousness, extraversion, agreeableness, and neuroticism.

Neuroticism

A personality trait characterized by emotional instability, anxiety, moodiness, worry, and a tendency towards negative emotions.

Major Traits

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