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Homework answers / question archive / Thinking about our model of consumer decision making under scarcity
Thinking about our model of consumer decision making under scarcity. The substitution effect of a wage increase would always cause an individual's choice of hours worked to: Select one: a. Decrease b. Increase c. Stay the same d. Double
Solution: increase
Explanation: The substitution effect of a rises in wages indicates that an individual will give up leisure to do more hours of work. The reason is that the work provides the higher reward because it becomes relatively more profitable compared to leisure
