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The substitution effect of a decrease in the wage will A) decrease leisure, regardless of whether leisure is a normal or inferior good
The substitution effect of a decrease in the wage will A) decrease leisure, regardless of whether leisure is a normal or inferior good. 13)increase leisure, regardless of whether leisure is a normal or inferior good. C) increase leisure only if leisure is a normal good. D) decrease leisure only if leisure is a
Expert Solution
Answer
B )
Explanation
If the substitution effect of wage increase then workers find it profitable to work more hours and reduce leisure time. So individual wants to work more hours per week regardless of whether leisure time is a normal or inferior commodity. So, The correct option is B "increase leisure, regardless of whether leisure is a normal or inferior good".
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