Answer to Question #281460 in Microeconomics for boots

Question

All normal goods whether they are economics goods , services or simply leisure will always

have IE and SE move in the same direction. True , False or Uncertain.

Answer 1

False.

Under substitution effect, the economic agent will work more because the wage rate will increase and they will get more income but with the income effect, the outcome is opposite since when the income is raised, the economic agent will spend more time on leisure.

The substitution effect will spend more on work while the income effect will spend more on leisure.