As the wage rate rises, the income effect influences workers to choose ________ leisure, and the substitution effect influences workers to choose ________ leisure.

Question

Quizplus · Accepted Answer

The income effect suggests that as wages rise, workers can afford more leisure (working less), while the substitution effect suggests that higher wages make leisure more costly in terms of foregone income, leading workers to choose less leisure (working more).

As the Wage Rate Rises, the Income Effect Influences Workers