The fact that more women have chosen to work as real wages rise is evidence that,for them
A)leisure is an inferior good.
B)income and substitution effects of higher real wages work in the same direction.
C)income and substitution effects of higher real wages may work in opposite directions.
D)income and substitution effects may work in opposite directions but that the substitution effect is stronger.

Question

Quizplus · Accepted Answer

The increase in labor participation among women as real wages rise suggests that the substitution effect (the incentive to work more because the opportunity cost of not working is higher) outweighs the income effect (the ability to afford more leisure time without working as much). This indicates that for women, the substitution effect of higher real wages is stronger, leading them to work more despite the potential for increased income to allow for more leisure time.

The Fact That More Women Have Chosen to Work as Real