When the wage increases,the income effect on the household's choices leads to
A) a decrease in consumption and leisure.
B) a decrease in consumption and an increase in leisure.
C) an increase in consumption and a decrease in leisure.
D) an increase in consumption and leisure.

Question

Quizplus · Accepted Answer

When wages increase, the household's income effect typically leads to an increase in both consumption and leisure, as the household can afford more goods and services and more leisure time due to higher income.

When the Wage Increases,the Income Effect on the Household's Choices