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- Income Inequalityeconomics-mcqs › income-inequality
- Published
- 1 Jun 2019
- Last updated
- 28 May 2026
If leisure is considered a normal good, what is the impact on labor supply when a wage rise causes the income effect to outweigh the substitution effect?
Multiple choice question for Income Inequality. Select an option, then review the explanation below.
Explanation
When leisure is a normal good and the income effect surpasses the substitution effect after a wage increase, individuals tend to work less because they can afford more leisure time. Therefore, labor supply decreases.
More Income Inequality MCQs
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- 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?