If Jay receives a pay cut and the price effect outweighs the income effect on his labor supply decisions,he will work:

Question

Quizplus · Accepted Answer

When Jay receives a pay cut, he will be incentivized to work more hours due to the income effect. However, the price effect will also lower the incentive to work, leading him to work fewer hours. If the price effect outweighs the income effect, meaning the decrease in the incentive to work is greater than the increase in the incentive to work, then Jay will work less hours. Therefore, the answer is B, less hours.

If Jay Receives a Pay Cut and the Price Effect