Because individuals initially own more time than they consume and sell the difference to their employers:
A) the direction of the income effect is the opposite than it is for other goods.
B) the direction of the income effect is the same as it is for other goods.
C) there is no income effect resulting from a change in the individual's wage rate.
D) the income effect of a wage change is relatively small.

Question

Quizplus · Accepted Answer

The income effect for labor is opposite to that for other goods because as wages increase, individuals may choose to work less and consume more leisure time, unlike other goods where an income increase generally leads to more consumption of the good.

Because Individuals Initially Own More Time Than They Consume and Sell