The substitution effect of a wage decrease,in the work-leisure model,applies when the worker chooses which option
A)He wishes to work less.
B)He wishes to work more.
C)He is indifferent between working more or less.
D)He wishes to work more but be less productive.

Question

Quizplus · Accepted Answer

The substitution effect suggests that as wages decrease, leisure becomes relatively cheaper compared to work, leading the worker to substitute work with leisure, thus choosing to work less.

The Substitution Effect of a Wage Decrease,in the Work-Leisure Model,applies