As wages rise, if an employee works the same number of hours as before, then the:...

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As wages rise, if an employee works the same number of hours as before, then the:...

As wages rise, if an employee works the same number of hours as before, then the:

	substitution effect and the income effect are of equal magnitude.
	substitution effect dominates the income effect.
	employee's income will fall.
	income effect dominates the substitution effect.

business economics

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Answer 1

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Option 1

substitution effect and the income effect are of equal magnitude

Substitution effect of wage is to decide between work and leisure, and income effect is the increase in income because of wage increase if the person works more with an increase in wage rather than leisure then the income effect is less than substitution effect and vice verse.

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Answer 2

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