When Is the Substitution Effect of a Wage Increase Observed

question 210

Multiple Choice

When is the substitution effect of a wage increase observed?

• A)The higher wage income causes workers to take more leisure and work less.
• B)Leisure's higher opportunity cost causes workers to take less leisure and work more.
• C)The higher wage income causes workers to take more leisure and work more.
• D)Leisure's higher opportunity cost causes workers to take more leisure and work less.

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Definitions:

Negative Correlation

A relationship between two variables in which one variable increases as the other decreases.

Controlled Variable

A factor in an experiment which is kept constant to test the relative impact of an independent variable.

Placebo Effect

The phenomenon in which a person's symptoms can improve due to their belief in the efficacy of a treatment with no therapeutic value.

Debriefing

A process of questioning and informing participants about the purpose and methods of a study after their participation is complete.