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Income and Substitution Effects

When the income effect of a higher wage rate is extremely powerful in that case the substitution effect, the: (1) supply curve of labor will be positively sloped. (2) demand for leisure increases like income rises. (3) human capital effect is stronger than the wealth effect. (4) supply curve of labor will be negatively sloped. (5) overtime wage effect is fifty percent more powerful than the income effect.

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