Consider an individual whose income increases substantially.This allows him to increase consumption of all normal goods and services.If he increases the consumption of leisure,it implies that:

Question

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The fact that an individual increases their consumption of leisure when their income increases substantially suggests that they are on the backward bending portion of the labor supply curve. This is because the income effect of the wage increase (which would typically cause individuals to work more) is outweighed by the substitution effect (which allows them to substitute leisure for work as their income rises).

Consider an Individual Whose Income Increases Substantially