Figure 14.1 A Consumer's Original Utility Maximizing Combination of Income and Leisure

question 119

Multiple Choice

Figure 14.1
A consumer's original utility maximizing combination of income and leisure is shown in the diagram above as point A. After a wage increase, the consumer's utility maximizing combination changes to point C.
-Refer to Figure 14.1. The income effect of the wage increase on the amount of hours of leisure is:

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

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Definitions:

Legally Bound

Obligated by law to act in accordance with an agreement.

Restraints Of Trade

Legal limitations placed on business practices and agreements that might unfairly limit competition or control prices.

Free Competition

An economic situation in which businesses operate without undue restrictions, allowing for the natural forces of supply and demand to determine prices and output.

Age Of Majority

The age at which an individual is considered legally capable of conducting himself or herself responsibly and is entitled to vote. In contract law, the age at which one is no longer an infant and can no longer disaffirm a contract.