If the only working member of a household receives a decrease in his wage rate,then

Question

Quizplus · Accepted Answer

The correct answer is D because the individual's response to a decrease in wage rate depends on the interplay between the income effect and the substitution effect. The income effect suggests that with lower wages, the individual might work more hours to maintain their income level, while the substitution effect suggests working fewer hours because leisure becomes relatively cheaper. The overall effect could lead to working more, fewer, or the same number of hours, depending on which effect dominates or if they balance out.

If the Only Working Member of a Household Receives a Decrease