Wt NS N₂ Figure 1: Labor Supply Curve 3. Figure 1 (above) shows a theoretical labor supply curve. For wages below w, what is true about labor supply? (a) Labor supply is increasing with the wage (b) The income effect relatively dominates the substitution effect with respect to the wage (c) The substitution effect relatively dominates the wealth effect with respect to the wage (d) Labor supply is perfectly inelastic (e) Labor supply is perfectly elastic

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Wt
NS
N₂
Figure 1: Labor Supply Curve
3. Figure 1 (above) shows a theoretical labor supply curve. For wages below w, what is true about labor supply?
(a) Labor supply is increasing with the wage
(b) The income effect relatively dominates the substitution effect with respect to the wage
(c) The substitution effect relatively dominates the wealth effect with respect to the wage
(d) Labor supply is perfectly inelastic
(e) Labor supply is perfectly elastic
Transcribed Image Text:Wt NS N₂ Figure 1: Labor Supply Curve 3. Figure 1 (above) shows a theoretical labor supply curve. For wages below w, what is true about labor supply? (a) Labor supply is increasing with the wage (b) The income effect relatively dominates the substitution effect with respect to the wage (c) The substitution effect relatively dominates the wealth effect with respect to the wage (d) Labor supply is perfectly inelastic (e) Labor supply is perfectly elastic
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