Question 1
Caroline's hourly wage rate was reduced from $22 to $16. As a result of the wage decrease, Caroline desires to work more hours and take fewer hours of leisure. For Caroline
◦ the income effect must be zero.
◦ the substitution effect dominates the income effect.
◦ the income effect dominates the substitution effect.
◦ the substitution effect must equal the income effect.
Question 2
Empirical evidence with respect to the labor supply decision suggests that
◦ the income effect seems to dominate for most people, which means that the aggregate labor supply responds negatively to an increase in the wage rate.
◦ the substitution effect seems to dominate for most people, which means that the aggregate labor supply responds positively to an increase in the wage rate.
◦ the substitution effect seems to dominate for most people, which means that the aggregate labor supply responds negatively to an increase in the wage rate.
◦ the income effect seems to dominate for most people, which means that the aggregate labor supply responds positively to an increase in the wage rate.
Defibrillator. Defibrillators are devices that supply a voltage charge to the heart in the hope of r
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