Dominance of the Substitution Effect on Labor Supply from a Wage Increase
When an individual's wage rate increases, a decision to work more hours indicates that the substitution effect has outweighed the income effect. The substitution effect encourages more work because the opportunity cost of leisure has risen, making work relatively more attractive. Simultaneously, the income effect encourages more leisure, as the individual is wealthier and can afford more of all normal goods. If the individual works more, it is because the incentive to substitute away from the now more expensive leisure is the stronger of the two forces.
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Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.3 Doing the best you can: Scarcity, wellbeing, and working hours - The Economy 2.0 Microeconomics @ CORE Econ
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