Exhibit 122 In Exhibit 122, which of the following is true if the wage rate decreasesfrom $14 to $6 per hour?

Question

Exhibit 12­2  In Exhibit 12­2, which of the following is true if the wage rate decreasesfrom $14 to $6 per hour?

Quizplus · Accepted Answer

According to the graph in Exhibit 12-2, the decrease in wage rate will increase the quantity demanded of leisure (decrease the quantity demanded of labor) from 50 hours to 70 hours. This can be explained by the substitution effect, where leisure becomes relatively less expensive compared to work. The income effect, where the decrease in wage rate increases the purchasing power of income and thus increases the quantity demanded of both leisure and labor, also contributes to the increase in leisure hours. However, since the substitution effect dominates the income effect, the net effect is a decrease in the quantity demanded of labor. Therefore, the supply curve slopes upward and to the left, indicating a positive relationship between wage rate and quantity of labor supplied. The correct answer is B.

Exhibit 12­2 in Exhibit 12­2, Which of the Following

Exhibit 122 in Exhibit 122, Which of the Following