Answer to Question #193267 in Microeconomics for Patel

Question

As Uber fares rise (for instance, during surge pricing), the number of drivers willing to work also rises. This is an example of the

1-Income effect of labor supply.

2-Substitution effect of labor demand.

3-Income effect of labor demand.

4-Substitution effect of labor supply.

Answer 1

The correct answer is alternative 1. Income effect of labor supply.

Reason - 

This is because the surge is been in the supply of these drivers. This surge has raised from the increase of fares of Uber, which will also positively impact their incomes. Thus, the heightened wages will attract maximum people to wish to work for Uber. 

Thus, this effect is that of income on the supply of this labor.