Ask Question
26 November, 12:51

Which of the following statements is true? The slope of the labor supply curve depends only on the substitution effect of a wage rate change. The slope of the labor supply curve depends only on the income effect of a wage rate change. The income effect and the substitution effect of a wage rate change work in the same direction. The income effect and the substitution effect of a wage rate change work in opposite directions.

+2
Answers (1)
  1. 26 November, 16:36
    0
    The income effect and the substitution effect of a wage rate change work in opposite directions.

    Explanation:

    The substitution effect refers to the change in consumption patterns as a result of change in relative income and prices of goods. For example, Coca-Cola vs Pepsi, chicken vs beef etc.

    The income effect refers to the change in consumption patterns as a result of change in the purchasing power of an individual. For example, a decrease in all product's prices means you can buy a cheaper product for the same price.

    Thus, the only correct statement is that the income effect and the substitution effect of a wage rate change work in opposite directions.
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Which of the following statements is true? The slope of the labor supply curve depends only on the substitution effect of a wage rate ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers