The income effect of a wage increase is observed when
A)the higher wage income causes workers to take more leisure and work less.
B)leisure's higher opportunity cost causes workers to take less leisure and work more.
C)the higher wage income causes workers to take less leisure and work more.
D)leisure's higher opportunity cost causes workers to take more leisure and work less.

Question

Quizplus · Accepted Answer

The income effect of a wage increase suggests that with higher income, workers may choose to enjoy more leisure time, thus working less, as they can maintain their standard of living with fewer work hours.

The Income Effect of a Wage Increase Is Observed When