Assume leisure is an inferior good instead of a normal good. The income effect of a wage increase will lead to a ________ demand for leisure and a ________ labor supply.
A) higher; higher
B) higher; lower
C) lower; higher
D) lower; lower

Question

Quizplus · Accepted Answer

If leisure is an inferior good, an increase in income (due to a wage increase) will lead to a decrease in the demand for leisure, as people will prefer to work more and consume more normal goods. This results in a higher labor supply.

Assume Leisure Is an Inferior Good Instead of a Normal