Economic studies of lottery winners and people who have inherited large amounts of money show that
A)the income effect of winning the lottery or inheriting large amounts of money likely outweighs the substitution effect for most people.
B)the substitution effect of winning the lottery or inheriting large amounts of money likely outweighs the income effect for most people.
C)most people view leisure as an inferior good.
D)most people's labor supply is unaffected by changes in wealth.

Question

Quizplus · Accepted Answer

Economic studies have shown that winning the lottery or inheriting large amounts of money leads to a decrease in work hours and labor supply, indicating that the income effect outweighs the substitution effect for most people. This is because people see winning the lottery or inheriting money as an increase in their overall wealth and can afford to work less, leading to a decrease in the opportunity cost of leisure.

Economic Studies of Lottery Winners and People Who Have Inherited