Lisa works 46 hours a week at $10 an hour.If her wage increases to $16.50:
A) the substitution effect implies that she will work less.
B) if leisure is a normal good,the income effect implies that she will work less.
C) if leisure is a normal good,the income effect will reinforce the substitution effect and she will work less.
D) Lisa's marginal product of labour has decreased.

Question

Quizplus · Accepted Answer

If leisure is a normal good, the income effect implies that with higher wages, Lisa can afford more leisure, thus working less.

Lisa Works 46 Hours a Week at $10 an Hour