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- Consumer Theory vs. Real Consumerseconomics-mcqs › consumer-theory-vs-real-consumers
- Published
- 2 Jun 2019
- Last updated
- 28 May 2026
Assuming leisure is considered a normal good, what happens to the quantity of labor supplied when wages rise?
Multiple choice question for Consumer Theory vs. Real Consumers. Select an option, then review the explanation below.
Explanation
When leisure is a normal good, an increase in wages can have two opposing effects: the substitution effect, which encourages more work due to higher opportunity cost of leisure, and the income effect, which may reduce labor supply because higher income allows more leisure. Therefore, labor supply will increase only if the substitution effect outweighs the income effect.
More Consumer Theory vs. Real Consumers MCQs
Practice related questions from the same subject.
- 1.Assuming that consumption during youth and old age are both normal goods, how does a rise in the interest rate affect the amount saved?
- 2.What happens to the budget line if both income and prices double simultaneously?
- 3.Based on Exhibit 4, assume a consumer has €100 to spend and must decide between purchasing socks or belts. How would you classify a pair of socks in this scenario?
- 4.Refer to Exhibit 4. Assume a consumer is deciding between purchasing socks and belts, with an income of €100. If the price of socks decreases from €5 to €2 per pair, which movement illustrates the substitution effect?
- 5.When a rise in a consumer's income leads to a reduction in the amount of a product they buy, how is this product classified?