The substitution effect of a wage decrease in the work-leisure model results in the worker choosing to
a. work less than before.
b. work more than before.
c. possibly work more or less than before.
d. work more with a higher level of consumption.
a
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Damian shares a small food truck with his sister. His share of the expenses is $500 per month. He has decided to get his own, newer food truck which he will not have to share with anyone. His expenses for the newer truck are $1,400 per month. Damian is
as rational as any other person. As an economics major, you rightly conclude that A) Damian cannot afford the newer truck and will have to go back to sharing a truck with his sister. B) Damian figures that the additional benefit of having his own truck (as opposed to sharing) is at least $900. C) Damian figures that the additional benefit of having his own truck (as opposed to sharing) is at least $1,400. D) the cost of having one's own truck outweighs the benefits.
If disposable income increases from $912 to $927 billion and MPC = 0.6, then consumption will increase by:
A. $6 billion B. $9 billion C. $54 billion D. $56 billion