Question

The substitution effect is present:

Group of answer choices

when wages decline, the quantity demanded of leisure declines, and workers increase the quantity of labor supplied.

when wages rise, the quantity demanded of leisure declines, and workers increase the quantity of labor supplied.

when wages rise, the quantity demanded of leisure increases, and workers decrease the quantity of labor supplied.

when workers decrease their quantity of labor supplied.

Answer 1

The substitution is present when wages rises,the quantity demanded of lesiure declines and workers increase the quantity of labour supplied because as wages rises workers are substituting there working hours against lesiure.

When wages decline, the quantity demanded of leisure declines, and workers increase the quantity of labor supplied and when wages rise, the quantity demanded of leisure increases, and workers decrease the quantity of labor supplied are both showing income effect.

when workers decrease their quantity of labor supplied neither shows substitution effect nor income effect as wages are not changing.