An increase in wealth will cause the labour supply curve to:
A) shift leftward if leisure is a normal good.
B) slope downward if the substitution effect dominates the income effect.
C) slope upward only if leisure is an inferior good.
D) bend backward if the income effect outweighs the substitution effect of a change in wealth and if leisure is a normal good.

Question

Quizplus · Accepted Answer

An increase in wealth increases the demand for leisure if leisure is a normal good, causing the labor supply curve to shift leftward as people choose to work less.

An Increase in Wealth Will Cause the Labour Supply Curve