Figure 14.2 A Consumer's Original Utility Maximizing Combination of Income and Leisure

question 122

Multiple Choice

Figure 14.2
A consumer's original utility maximizing combination of income and leisure is shown in the diagram above as point A. After a wage decrease, the consumer's utility maximizing combination changes to point C.
-Refer to Figure 14.2. The income effect of the wage decrease on the amount of hours of leisure is:

• A) L₀ to L₁.
• B) L₀ to L₂.
• C) L₁ to L₂.
• D) L₂ to L₁.
• E) none of the above