If leisure is a normal good for Randy, then both the substitution effect and the income effect of a decrease in the wage rate will cause Randy to work fewer hours.

Question

Quizplus · Accepted Answer

The substitution effect of a decrease in the wage rate will cause Randy to work more hours, as leisure becomes relatively more expensive. However, the income effect will cause him to work fewer hours if leisure is a normal good.

If Leisure Is a Normal Good for Randy, Then Both