The Combined Effect of a Real Wage Increase Is That

Multiple Choice

The combined effect of a real wage increase is that

A) the income effect always dominates, leading to fewer hours worked at a higher wage.
B) the substitution effect always dominates, leading to more hours worked at a higher wage.
C) if the substitution effect outweighs the income effect, the labour supply curve slopes downward, but if the income effect outweighs the substitution effect, the labour supply curve slopes upward.
D) if the substitution effect outweighs the income effect, the labour supply curve slopes upward, but if the income effect outweighs the substitution effect, the labour supply curve slopes downward.