Julie works at a local hat factory for $12 an hour and typically works 40 hours a week.The company threatens layoffs,so Julie and the others agree to a pay cut.Julie now earns $10 an hour and works every hour over 40 that her boss will let her.Julie's response to this pay cut was to work:

Question

Quizplus · Accepted Answer

Julie's response to the pay cut was to work more, which demonstrates a dominant income effect. This means that despite the reduction in her pay rate, Julie still values the income she can earn from working more hours above the leisure time she would have without working those extra hours. Therefore, she is willing to work more to make up for the pay cut and maintain her income level.

Julie Works at a Local Hat Factory for $12 an Hour