You have just won a cash award of $500 for academic excellence.

Question

Quizplus · Accepted Answer

The income effect of the award will be larger than its substitution effect because the individual's income has increased. The substitution effect would only come into play if the award had induced the individual to change their behavior in terms of how much they study or how they allocate their time between academic and non-academic activities. However, there is no indication that the award has incentivized any such changes.

You Have Just Won a Cash Award of $500 for Academic