Asked by

Keona McGee
on Nov 04, 2024

verifed

Verified

Assume leisure is a normal good. The substitution effect of a wage decrease implies a ________ demand for leisure and a ________ labor supply.

A) lower; higher
B) higher; lower
C) higher; higher
D) lower; lower

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods, leading consumers to substitute cheaper goods for more expensive ones.

Wage Decrease

A reduction in the pay rate of a worker or a group of workers.

Labor Supply

The total hours that workers are willing and available to work at a given wage rate, within a specific labor market.

  • Grasp the link between compensation rates and the availability of labor, taking into account the income and substitution impacts.
  • Acquire knowledge on the labor supply curve and how wage changes influence it, considering the roles of income and substitution effects.
verifed

Verified Answer

NJ
Nailah JonesNov 08, 2024
Final Answer:
Get Full Answer