When consumption and leisure are both normal goods,after an increase in real dividend income minus taxation,the rational consumer
A) increases consumption and increases labor supply.
B) increases consumption and reduces labor supply.
C) reduces consumption and increases labor supply.
D) reduces consumption and reduces labor supply.

Question

Quizplus · Accepted Answer

When both consumption and leisure are normal goods, an increase in real dividend income minus taxation increases the consumer's overall wealth. This leads to an increase in consumption and a decrease in labor supply, as the consumer can afford more leisure.

When Consumption and Leisure Are Both Normal Goods,after an Increase