Unlike regular indifference curve analysis,that involving the labor consumption trade-off only includes income effects (not substitution effects)because labor only generates income.

Question

Quizplus · Accepted Answer

The statement is incorrect. The labor consumption trade-off involves both income and substitution effects, as a change in the wage rate affects both the opportunity cost of leisure and the income available to purchase goods and services.

Unlike Regular Indifference Curve Analysis,that Involving the Labor Consumption Trade-Off