Assume leisure is an inferior good instead of a normal good. The income effect of a wage increase will lead to a demand for leisure and a labor supply. A) higher; higher B) higher; lower C) lower; higher D) lower; lower

Inferior goods are only purchased when the income a household is receiving is low. This means that if income increases, there will be less demand for the inferior good. With income increasing here and Leisure being inferior, leisure will be demanded for less.

This will lead to an increase in labor supply because with people buying less leisure(which means working less), they will begin to work more thereby increasing the labor supply.

nikitavidya0 nikitavidya0 · Answer 2 · 2022-03-30T06:18:19+02:00

Assume leisure is an inferior good instead of a normal good. The income effect of a wage increase will lead to lower demand for leisure and a higher labor supply

What is the income effect on inferior goods?

Inferior goods are low-quality goods that customers purchase when having a low income. It results in lower demand for inferior goods that is leisure when income rises.

Similarly, the labor supply would increase due to a decrease in demand for leisure. Thus, laborers would be willing to work more than enjoy free time.

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Assume leisure is an inferior good instead of a normal good. The income effect of a wage increase will lead to a ________ demand for leisure and a ________ labor supply. A) higher; higher B) higher; lower C) lower; higher D) lower; lower

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What is the income effect on inferior goods?

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Assume leisure is an inferior good instead of a normal good. The income effect of a wage increase will lead to a demand for leisure and a labor supply. A) higher; higher B) higher; lower C) lower; higher D) lower; lower