If Jeff's wage rate rises, he decides to work more hours. From this, we can infer that____________.

a. for Jeff, the substitution effect is equal to the income effect.
b. for Jeff, the substitution effect is less than the income effect.
c. for Jeff, the substitution effect is greater than the income effect.
d. none of the above is correct.

Question

11-03-2020
Business

contestada

If Jeff's wage rate rises, he decides to work more hours. From this, we can infer that____________.

a. for Jeff, the substitution effect is equal to the income effect.
b. for Jeff, the substitution effect is less than the income effect.
c. for Jeff, the substitution effect is greater than the income effect.
d. none of the above is correct.

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funmilaciousfunmie78 funmilaciousfunmie78 · Answer 1 · 2020-03-15T04:10:25+01:00

Answer:

If Jeff's wage rate rises, he decides to work more hours. From this, we can infer that for Jeff, the substitution effect is greater than the income effect - option C.

Explanation:

The substitution effect is stronger than the income effect in a case whereby the supply of labor increases as the wage rate increases .

On the other hand, when the supply of labor decreases as the wage rate increases, then the income effect is stronger than the substitution effect.

With regards to the scenario given in the question - with an increase in the wage rate, Jeff has decided to work more hours.

Thus, in the given case, it can be inferred that for Jeff, the substitution effect is greater than the income effect.

Therefore, the correct answer is option C.