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lstar1993 lstar1993
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5 years ago

Question 1.

Mickey got a raise from $14 an hour to $20 an hour. As a result of the wage increase, Mickey desires to work more hours and take less hours of leisure. For Mickey



▸ the substitution effect dominates the income effect.

▸ the income effect dominates the substitution effect.

▸ the substitution effect must equal the income effect.

▸ the substitution effect must be zero.

Question 2.

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.
Textbook 
Principles of Economics

Principles of Economics


Edition: 12th
Authors:
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bli14bli14
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