If Wages Decrease and Workers Choose to Work More Hours

question 214

Multiple Choice

If wages decrease and workers choose to work more hours or more shifts, their behavior is evidence of

• A)the substitution effect.
• B)the income effect.
• C)rational expectations.
• D)rational ignorance.

Recognize and account for the investment of a subsidiary in its parent company.

Determine consolidated net income including the impact of intra-entity transactions.

Understand mutual, direct, and indirect ownership structures within corporate groups.

Calculate income tax expense and the effect of tax allocation methods.

---

Definitions:

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods.

Marginal Product

The increase in output that results from employing one more unit of a factor of production.

Income Effect

How an individual's or economic income shift influences the demand for goods or services.

Substitution Effect

The substitution effect describes the change in consumption patterns due to a change in the relative prices of goods, leading consumers to substitute one good for another.