Economics 9708 · AS & A Level · Indifference curves and budget lines

Indifference curves and budget lines — practice question

When her real wage increases, a worker chooses to work fewer hours. How do the income and substitution effects account for this?

  • Aincome effect: negative; substitution effect: positive; balance: income effect outweighs substitution effect
  • Bincome effect: negative; substitution effect: positive; balance: substitution effect outweighs income effect
  • Cincome effect: positive; substitution effect: negative; balance: substitution effect outweighs income effect
  • Dincome effect: positive; substitution effect: positive; balance: income effect outweighs substitution effect

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