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Author Question: Empirical evidence with respect to the labor supply decision suggests that the substitution effect ... (Read 280 times)

hubes95

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Question 1

Jenny's hourly wage rate was increased from $17 to $21. As a result of the wage increase, Jenny desires to work fewer hours and take more hours of leisure. For Jenny


◦ 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 substitution effect seems to dominate for most people, which means that the aggregate labor supply responds ________ in the wage rate.


◦ negatively to a decrease
◦ negatively to an increase
◦ positively to a decrease
◦ independently from an increase or a decrease


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Marked as best answer by hubes95 on Apr 19, 2019

CharlieArnold

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