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- Income Inequalityeconomics-mcqs › income-inequality
- Published
- 1 Jun 2019
- Last updated
- 28 May 2026
According to the substitution effect, what happens to leisure consumption when wages rise?
Multiple choice question for Income Inequality. Select an option, then review the explanation below.
Explanation
When wages increase, leisure time effectively becomes more expensive because the opportunity cost of not working is higher. As a result, the substitution effect predicts that households will cut back on leisure and work more, reducing the amount of leisure they consume.
More Income Inequality MCQs
Practice related questions from the same subject.
- 1.Which of the following best describes the Benazir Benefit Income Scheme?
- 2.Which category of tax does VAT best represent?
- 3.When a tax can be transferred, what determines the actual burden of the tax?
- 4.What does tax incidence refer to?
- 5.What does a progressive income tax system imply about the tax rate for individuals with higher earnings?