Aggregate labor demand : the sum of nd1 and nd2. Ns depends on w and labor-leisure(normal goods) choice. Change in w => income effect & substitution effect. An increasing in w (real wage) results in. Sub effect makes leisure more expensive => reduction in leisure (normal goods) or increasing in labor supply. Income effect: increasing in wage => increasing income => increasing consumption in leisure (normal goods) or decreasing in labor supply (not always true for an individual), but. Aggregate labor supply: upward sloping: implicate aggregate sub effect > income effect w. Shift in ns: rightward or upward shift, decreasing in wealth. N www. notesolution. com: decreasing in future wage (expectation) Increasing labor force (participation rate increases, proportion of population who is looking for a job) after world war ii (women labor force) meantime, do not have enough capacity to offer jobs.