The Income Effect of a Decrease in the Wage Rate

question 56

Multiple Choice

The income effect of a decrease in the wage rate causes the quantity of labor supplied to _____

• A)always increase.
• B)increase only if the individual desires more leisure time.
• C)increase only if the substitution effect outweighs the income effect.
• D)always decrease.
• E)decrease only if the substitution effect is weaker than the income effect.

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Definitions:

Production Capability

A measure of the maximum output or production level that a company can sustainably achieve.

Labor Relations

The study and practice of managing the relationships between employers and their workforce, including negotiations, contract implementation, and dispute resolution.

Purchased Products

Items or goods that have been bought from a manufacturer, supplier, or retailer.