Lisa works 46 hours a week at $10 an hour.If her wage increases to $16.50:
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 with higher wages, she can afford more leisure time, reducing her work hours.

Lisa Works 46 Hours a Week at $10 an Hour