When Josh's wage rises and he decides to work more hours, we know that the _________ effect has dominated the _________ effect.
A) substitution; income
B) labor; leisure
C) income; substitution
D) leisure; labor
E) substitution; leisure

Question

Quizplus · Accepted Answer

When Josh's wage rises and he decides to work more hours, the substitution effect has dominated the income effect. The substitution effect suggests that as wages increase, the opportunity cost of leisure becomes higher, leading individuals to substitute leisure for more work.

When Josh's Wage Rises and He Decides to Work More