Katie wins $3 million in her state's lottery. If Katie drastically reduces the number of hours she works after she wins the money, we can infer that the income effect is larger than the substitution effect for her.

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The income effect describes how a person's consumption changes with an increase in purchasing power (here, winning $3 million), leading to a reduction in work hours if leisure is preferred. The substitution effect, which might encourage more work when wages effectively rise (due to higher wealth), is evidently weaker in her case, as she chooses more leisure over work.

Katie Wins $3 Million in Her State's Lottery