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- Subject
- Income Inequalityeconomics-mcqs › income-inequality
- Published
- 1 Jun 2019
- Last updated
- 28 May 2026
When the substitution effect outweighs the income effect, what is the impact of higher net wages on labor supply?
Multiple choice question for Income Inequality. Select an option, then review the explanation below.
Explanation
If the substitution effect is greater than the income effect, an increase in net wages motivates workers to supply more labor because the opportunity cost of leisure rises. Hence, higher wages lead to an increase in labor supply.
More Income Inequality MCQs
Practice related questions from the same subject.
- 1.Which of the following best describes the Benazir Benefit Income Scheme?
- 2.Which category of tax does VAT best represent?
- 3.When a tax can be transferred, what determines the actual burden of the tax?
- 4.What does tax incidence refer to?
- 5.What does a progressive income tax system imply about the tax rate for individuals with higher earnings?