If all goods, including leisure, are normal goods, then an increase in the wage rate will necessarily make people want to work more hours.

Question

Quizplus · Accepted Answer

An increase in the wage rate for normal goods, including leisure, can lead to a substitution effect where work is substituted for leisure because work becomes relatively more rewarding. However, there's also an income effect where individuals might choose to work less because they can maintain their standard of living with fewer hours worked. The overall effect on labor supply depends on the relative strength of these two effects.

If All Goods, Including Leisure, Are Normal Goods, Then an Increase