Which of the following statements is true,assuming leisure is a normal good?
A) If the income effect is sufficiently large, the labour supply curve will bend backwards
B) If the income effect is sufficiently small, the labour supply curve will bend backwards
C) If the income effect is sufficiently large, the labour supply curve will slope down
D) If the income effect is sufficiently large, the labour supply curve will shift to the left

Question

Quizplus · Accepted Answer

When leisure is a normal good, an increase in income leads to an increase in the demand for leisure, assuming the income effect outweighs the substitution effect. This can result in a backward-bending labor supply curve, as individuals may choose to work less when their income increases beyond a certain point, preferring more leisure time instead.

Which of the Following Statements Is True,assuming Leisure Is a Normal