When tastes are quasilinear in leisure, which of the following is true:
A)The wage elasticity of labor supply is zero.
B)The wage elasticity of labor supply is positive.
C)The wage elasticity of labor supply is negative.
D)The wage elasticity of demand is negative.
E)Both (a) and (d).
F)Both (b) and (d).
G)Both (c) and (d).

Question

Quizplus · Accepted Answer

In the case of quasilinear preferences in leisure, the wage elasticity of labor supply is positive because as wages increase, individuals are willing to work more hours since the marginal utility of earning more becomes greater than the marginal utility of leisure. Additionally, the wage elasticity of demand is generally negative, reflecting the basic economic principle that as the price (or cost, in terms of wage) of a good or service increases, the demand for it typically decreases.

When Tastes Are Quasilinear in Leisure, Which of the Following