1.The substitution effect describes the a. incentive to work more when the wages

ID: 1166188 • Letter: 1

Question

1.The substitution effect describes the

a. incentive to work more when the wages rises

b. incentive to work less when the wage rises.

c. decision whether to work more or less.

d. decision whether to join the labor force.

e. incentive to change jobs (this answer was wrong on my test)

2.The income effet describes the

a. incentive to change jobs

b. decision whether to join the labor force

c. decision to ask for a raise

d. incentive to work more when the wage rises (This answer was wrong on my quiz)

e. incentive to work less when the wage rises

1. a) Incentive to work more because when wages increase the opportunity cost of leisure is high.

2.e) Incentive to work less. Because when income increases, people will want to work less and consume more.

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