Which one of the following gives rise to a retirement-inducing substitution effect? As workers approach retirement age:

Question

Quizplus · Accepted Answer

The substitution effect refers to the change in consumption patterns due to a change in the relative prices of goods or services. In the context of retirement, when earnings potential decreases, leisure becomes relatively less costly compared to working, making retirement more appealing. This is because the opportunity cost of leisure (what one gives up by not working) decreases as the potential earnings from working decrease.

Which One of the Following Gives Rise to a Retirement-Inducing