Question

1. True or false. The first word of your answer has to be either true or false. If the first word of your answer is not true or false, you receive 0 points. If the statement is true you are finished answering. If your answer is false, briefly explain why it is false. a. "If leisure is a normal good, a rise in the wage rate must lead to an increase in the number of hours that an individual wishes to work." b. "A good is inferior only if quantity demanded falls as price falls." c. " If the income effect is greater than the substitution effect and leisure is an inferior good, the labor supply curve will be negatively sloped."

Answer 1

a. FALSE, since leisure is a normal good, an increase in the wage rate will result in both substitution and income effect which will decrease the number of hours worked and increase the leisure hours.

b. TRUE

c. FALSE, if leisure is an inferior good, as rise in wages will result in more working hours and les leisure hours, meaning that the labor supply has a positive slope.