When the Substitution Effect Is Greater Than the Income Effect

question 3

Multiple Choice

When the substitution effect is greater than the income effect, Donna will supply more work if

• A) the wage rate and the price level increase proportionately.
• B) the percentage increase in the price level is greater than the percentage change in wages.
• C) wages are falling faster than prices.
• D) none of the above

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Definitions:

Motivation

Motivation is the internal process that activates, guides, and maintains behavior towards achieving a goal.

Homeostasis

The capacity of an organism or environment to sustain equilibrium in reaction to alterations.

Intrinsic Motivation

The drive to engage in activities for their own sake because they are interesting and satisfying in and of themselves, not for some separable consequence.

Extrinsic Motivation

The drive to perform actions due to external rewards or pressures rather than for intrinsic satisfaction.