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Figure: Rita's Time Allocation Budget Line
-(Figure: Rita's Time Allocation Budget Line)Look at the figure Rita's Time Allocation Budget Line.It is based on 80 hours available for labour and leisure.Rita chooses 40 hours of leisure and an income of $280.When her hourly wage doubles,Rita chooses 30 hours of leisure and an income of $700.The substitution effect is making her work _____,the income effect is making her work _____,and the substitution effect is _____ than the income effect.
A) more;less;stronger
B) less;more;stronger
C) more;less;weaker
D) less;more;weaker

Question

Use the following to answer questions :
Figure: Rita's Time Allocation Budget Line 
-(Figure: Rita's Time Allocation Budget Line)Look at the figure Rita's Time Allocation Budget Line.It is based on 80 hours available for labour and leisure.Rita chooses 40 hours of leisure and an income of $280.When her hourly wage doubles,Rita chooses 30 hours of leisure and an income of $700.The substitution effect is making her work _____,the income effect is making her work _____,and the substitution effect is _____ than the income effect.
A) more;less;stronger 
B) less;more;stronger 
C) more;less;weaker 
D) less;more;weaker

Quizplus · Accepted Answer

The substitution effect encourages Rita to work more as her wage increases, while the income effect allows her to work less because she can maintain her income with fewer hours. The fact that she works more hours indicates the substitution effect is stronger than the income effect.

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