Lisa works 46 hours a week at a wage of $10 an hour.If her wage increases to $16.50, then:
A)the substitution effect implies that she will work less.
B)if leisure is a normal good, the income effect implies that she will work less.
C)if leisure is a normal good, the income effect will reinforce the substitution effect and she will work less.
D)Lisa's marginal product of labor has decreased.

Question

Quizplus · Accepted Answer

If leisure is a normal good, the income effect implies that Lisa will work less because she can afford more leisure time with her higher income.

Lisa Works 46 Hours a Week at a Wage of $10