Question

If Molly Bee increases her work hours when her wage increases, then

a. The substitution effect of the wage increase outweighs the income effect.
b. Molly is spending beyond her means.
c. Leisure is an inferior good to Molly.
d. The income effect of the wage increase outweighs the substitution effect.

Answer 1

C) Leisure is an inferior good to Molly

Explanation :

Molly increases her working hours even when her wage increases shows that leisure Doesn't even fall in her opportunity cost and therefore is seen as inferior to Molly because she's not sacrificing it

And the income and substitution effect can't outweigh each other because substitution is another word of saying opportunity cost