During the holiday season some people take a second job or work more hours. From this we know that:
A) the income effect becomes more powerful than the substitution effect during the holiday season.
B) the substitution effect becomes more powerful than the income effect during the holiday season.
C) the income and substitution effects cancel each other out during the holiday season.
D) people want to spend more time with their family during the holiday season.

Question

Quizplus · Accepted Answer

The substitution effect suggests that as wages increase, people are more inclined to work more hours because the opportunity cost of not working (i.e., leisure) becomes higher. During the holiday season, people often work more hours or take second jobs to earn more money, indicating that the substitution effect is stronger than the income effect.

During the Holiday Season Some People Take a Second Job