Assume That the Substitution Effect Dominates the Income Effect

question 177

Multiple Choice

Assume that the substitution effect dominates the income effect. When wages fall

• A) people will work more hours.
• B) people will work fewer hours.
• C) people will work the same number of hours.
• D) the effect on the hours people work is ambiguous.

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Definitions:

Sensory Registers

A memory system that temporarily holds information from the sensory systems, allowing it a brief opportunity to be processed further.

Sensory Information

Data that is collected by the senses (sight, smell, touch, taste, and hearing) and sent to the brain for processing, interpretation, and response.

External World

Everything that exists outside the mind, including physical objects, events, and other people, as perceived through the senses.

Information Processing Model

A cognitive approach that compares human thinking to computer processing, emphasizing the way information is encoded, stored, and retrieved.