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2 weeks ago

Question 1.

If Molly Bee increases her work hours when her wage increases, then

• the income effect of the wage increase outweighs the substitution effect.

• the substitution effect of the wage increase outweighs the income effect.

• leisure is an inferior good to Molly.

• Molly is spending beyond her means.

Question 2.

If Alan Shaw reduces his work hours when his salary increases, then

• the income effect of his salary increase dominates the substitution effect.

• the substitution effect of his salary increase dominates the income effect.

• the income effect of his salary increase is completely offset by the substitution effect.

• leisure is an inferior good to Alan.
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Microeconomics
Edition: 7th
Authors:
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wrote...
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2 weeks ago
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Answer 1

the substitution effect of the wage increase outweighs the income effect.

Answer 2

the income effect of his salary increase dominates the substitution effect.
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wrote...
2 weeks ago
Smart ... Thanks!
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