Suppose a worker is working 40 hours a week at a certain wage.After the wage rate increases:

Question

Quizplus · Accepted Answer

If the wage rate increases, the worker may choose to work less if the income effect of the wage increase (i.e. the increase in the worker's purchasing power) is greater than the substitution effect (i.e. the incentive to work more due to the higher wage rate). This is because the worker may value the increased leisure time more than the additional income from working longer hours. Therefore, option B is the correct choice.

Suppose a Worker Is Working 40 Hours a Week at a Certain