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question 101

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Use the following to answer questions:
Figure: Rita's Time Allocation Budget Line Use the following to answer questions: Figure: Rita's Time Allocation Budget Line   -(Figure: Rita's Time Allocation Budget Line)  Look at the figure Rita's Time Allocation Budget Line. It is based on 80 hours available for labor and leisure. Rita chooses 40 hours of leisure and income of $280. When her hourly wage doubles, Rita chooses 30 hours of leisure and income of $700. The substitution effect is making her work _____, the income effect is making her work _____, and the substitution effect is _____ than the income effect. A)  more; less; stronger B)  less; more; stronger C)  more; less; weaker D)  less; more; weaker
-(Figure: Rita's Time Allocation Budget Line) Look at the figure Rita's Time Allocation Budget Line. It is based on 80 hours available for labor and leisure. Rita chooses 40 hours of leisure and income of $280. When her hourly wage doubles, Rita chooses 30 hours of leisure and income of $700. The substitution effect is making her work _____, the income effect is making her work _____, and the substitution effect is _____ than the income effect.


Definitions:

Income

The money received by an individual or group for work, from investments, or from other sources, often used as an indicator of economic standing.

Marginal Tax Rate

The percentage of tax applied to your next dollar of income, indicating the tax bracket rate for each additional dollar earned.

Average Tax Rate

The proportion of total income that is paid as taxes, calculated by dividing the total taxes paid by the total income.

Alcohol Tax

A special tax imposed on alcoholic beverages to generate revenue and/or discourage excessive consumption owing to health or social reasons.

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