Use the following to answer questions 16-17:
Figure 13.3
-(Figure 13.3) The figure shows budget constraints and indifference curves for a representative individual. Identify the substitution effect of the increase in the wage rate in the associated graph.
A) C to B
B) B to A
C) A to C
D) A to B

Question

Use the following to answer questions 16-17:
Figure 13.3 
-(Figure 13.3) The figure shows budget constraints and indifference curves for a representative individual. Identify the substitution effect of the increase in the wage rate in the associated graph.
A) C to B 
B) B to A 
C) A to C 
D) A to B

Quizplus · Accepted Answer

The substitution effect is the movement from point A to point B, as the individual substitutes away from leisure and towards work in response to the higher wage rate.

Use the Following to Answer Questions 16-17