Assume leisure is a normal good. The substitution effect of a wage increase implies a ________ demand for leisure and a ________ labor supply.
A) lower; higher
B) higher; lower
C) higher; higher
D) lower; lower

Question

Quizplus · Accepted Answer

The substitution effect of a wage increase implies that leisure becomes relatively more expensive compared to work, leading individuals to substitute away from leisure (hence, a lower demand for leisure) and towards work, increasing the labor supply.

Assume Leisure Is a Normal Good