If Rita's labor-supply curve is downward-sloping, then for Rita
A)an increase in the wage creates an income effect that is greater than the substitution effect.
B)an increase in the wage creates a substitution effect that is greater than the income effect.
C)leisure and consumption are perfect substitutes.
D)leisure and consumption are perfect complements.

Question

If Rita's labor-supply curve is downward-sloping, then for Rita​
A)​an increase in the wage creates an income effect that is greater than the substitution effect.
B)​an increase in the wage creates a substitution effect that is greater than the income effect.
C)​leisure and consumption are perfect substitutes.
D)​leisure and consumption are perfect complements.

Quizplus · Accepted Answer

A downward-sloping labor-supply curve indicates that as wages increase, Rita chooses to work less, suggesting the income effect (desire for more leisure due to higher income) outweighs the substitution effect (incentive to work more due to higher wages).

If Rita's Labor-Supply Curve Is Downward-Sloping, Then for Rita​

If Rita's Labor-Supply Curve Is Downward-Sloping, Then for Rita