In labor supply, the change in people's choices when they have more income is called the _____ effect.

Question

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The change in people's choices when they have more income is called the income effect. This effect is a result of individuals having more purchasing power and being able to afford more goods and services. As a result, they may choose to work less (the income effect of leisure) or work more (the income effect of normal goods) depending on their preferences.

In Labor Supply, the Change in People's Choices When They