Theoretically,an increase in the real wage
A) increases leisure.
B) decreases leisure.
C) has an ambiguous effect on leisure.
D) has no effect on leisure.

Question

Quizplus · Accepted Answer

An increase in the real wage has an ambiguous effect on leisure because it involves both an income effect, which tends to increase leisure, and a substitution effect, which tends to decrease leisure. The overall effect depends on which of these two effects is stronger.

Theoretically,an Increase in the Real Wage