In a life-cycle model,expected wage changes cause ________,while unexpected wage changes cause ________.

Question

Quizplus · Accepted Answer

Expected wage changes cause both income and substitution effects because individuals can plan and adjust their labor supply based on these anticipated changes. Unexpected wage changes also cause both income and substitution effects, but individuals have less time to adjust, leading to immediate impacts on their labor supply decisions.

In a Life-Cycle Model,expected Wage Changes Cause ________,While Unexpected Wage