Consider a worker whose choice is between hours of free time and consumption. His company has now cut his wage rate. Which of the following statements is correct? O As a result of the substitution effect, the worker would reduce his free time. The income effect means that the worker would increase his free time. The worker may or may not reduce his free time as a result of the wage cut. The income effect will always dominate the substitution effect of the wage cut.
Consider a worker whose choice is between hours of free time and consumption. His company has now cut his wage rate. Which of the following statements is correct? O As a result of the substitution effect, the worker would reduce his free time. The income effect means that the worker would increase his free time. The worker may or may not reduce his free time as a result of the wage cut. The income effect will always dominate the substitution effect of the wage cut.
Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter21: The Theory Of Consumer Choice
Section: Chapter Questions
Problem 1PA
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![Consider a worker whose choice is between hours of free time and consumption. His
company has now cut his wage rate. Which of the following statements is correct?
O As a result of the substitution effect, the worker would reduce his free time.
The income effect means that the worker would increase his free time.
The worker may or may not reduce his free time as a result of the wage cut.
The income effect will always dominate the substitution effect of the wage cut.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F41fb2e79-6119-483f-862d-38ac2b2b102e%2F6101867f-cf89-4789-832b-007870b648cc%2Fja8xntn_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Consider a worker whose choice is between hours of free time and consumption. His
company has now cut his wage rate. Which of the following statements is correct?
O As a result of the substitution effect, the worker would reduce his free time.
The income effect means that the worker would increase his free time.
The worker may or may not reduce his free time as a result of the wage cut.
The income effect will always dominate the substitution effect of the wage cut.
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