Shelley wins $1 million in her state's lottery. If Shelley keeps working after she wins the money, we can infer that the substitution effect must exactly offset the income effect for her.

Question

Quizplus · Accepted Answer

The substitution and income effects describe how individuals might change their labor supply in response to changes in income or wages, but an individual continuing to work after winning the lottery does not necessarily mean these two effects exactly offset each other. Shelley might continue working for reasons unrelated to these effects, such as personal fulfillment, social reasons, or a desire to accumulate more wealth.

Shelley Wins $1 Million in Her State's Lottery