Answer to Question #252216 in Macroeconomics for Muhammad Madad kha

Question

Question #93290
Suppose that the public taste changes in such a way that leisure comes to more desirable than commodities How do you expect such a change to affect output, employment and real wages in the classical model?

Answer 1

Preference of leisure over goods lowers the demand for production sector. Therefore, output, employment and real wage in the classical model will tend to decrease.