Because Leisure Is a Normal Good, an Increase in the Wage

question 68

Multiple Choice

Because leisure is a normal good, an increase in the wage rate will result in

• A)an increase in the quantity of labour supplied because of both the substitution effect and the income effect.
• B)a decrease in the quantity of labour supplied because of the substitution effect and an increase in the quantity of labour supplied because of the income effect.
• C)an increase in the quantity of labour supplied because of the substitution effect and a decrease in the quantity of labour supplied because of the income effect.
• D)an increase in the quantity of labour supplied because of the substitution effect.At low wages the income effect causes an increase in the quantity of labour supplied, but at high wages the income effect causes a decrease in the quantity of labour supplied as the wage rises.

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Definitions:

Firms

Businesses or companies engaged in commercial, professional, or industrial activities.

Quota

A government-imposed trade restriction that limits the number or monetary value of goods that can be imported or exported during a specific time period.

Peppermint Candy Canes

Traditional Christmas sweets with a distinctive red and white striped pattern, flavored with peppermint.

Sugar

A sweet-tasting, soluble carbohydrate found in many plants, commonly used as a sweetener in foods and drinks.