If Jeff's wage rate rises,he decides to work fewer hours.From this,we can infer that
A)for Jeff, the substitution effect is greater than the income effect.
B)for Jeff, the substitution effect is equal to the income effect.
C)for Jeff, the substitution effect is less than the income effect.
D)Jeff is a nitwit.

Question

Quizplus · Accepted Answer

When Jeff decides to work fewer hours as his wage rate rises, it indicates that the income effect (the increase in his purchasing power, leading him to enjoy more leisure time) outweighs the substitution effect (the incentive to work more hours because the opportunity cost of not working has increased).

If Jeff's Wage Rate Rises,he Decides to Work Fewer Hours