Explain the expression "time is more valuable than money." Explain in words and use a diagram to illustrate the implications of this for a person's labor supply curve

A person has a certain amount of time that can be spent working or in leisure. The more time they spend working, the more money they earn, but the less time they have for leisure (and vice versa). An increase in the wage is believed to have two effects: a substitution effect and an income effect. The substitution effect causes the person to work more when the wage increases and substitute away from leisure which has become relatively more expensive. The income effect causes the person to work less and consume more leisure when the wage increases because they are now wealthier. The overall effect of a change in the wage on a person's labor supply depends on which effect dominates. If time is more valuable than money, then that is saying that the income effect dominates the substitution effect.

The diagram shows the labor supply curve as a backward-bending curve. The upward-sloping part is where the substitution effect dominates and the backward-bending part is where the income effect dominates. If time is more valuable than money-a person must be on the backward-bending part of the labor supply curve.