The _______ effect means that, other things remaining the same, the higher the wage rate, the less time people will spend working and the more time people will spend at leisure.
A) price
B) labour
C) substitution
D) income

Question

Quizplus · Accepted Answer

The income effect describes how people will work less and enjoy more leisure time as their income (from higher wages, in this case) increases, assuming all other factors remain constant. This is because they can maintain the same standard of living with less work.

The _______ Effect Means That, Other Things Remaining the Same