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An Increase in the Wage Will Produce a Substitution Effect

Question 40

Multiple Choice

An increase in the wage will produce a substitution effect and an income effect. What is the substitution effect of a wage change?


A) as the wage increases, the price of leisure becomes more expensive, and workers will consume less leisure.
B) as the wage increases, the price of working becomes more expensive, and workers will substitute more leisure for work.
C) as the wage increases, the opportunity cost of not working becomes less expense, and workers will work less.
D) as the wage increases, price of leisure becomes more expensive, and workers will enjoy more intensive leisure activities.

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