The substitution effect of a decrease in the wage rate would

The substitution effect of a decrease in the wage rate would lead most people to

a. supply less labor and demand less leisure

. b. supply less labor and demand more leisure.

c. supply more labor and demand less leisure.

d. supply more labor and demand more leisure.

Solution

Ans: supply less labor and demand more leisure

Explanation:

If wages decreases, then work becomes relatively less profitable than leisure. Therefore, most people will supply less labor and demand more leisure.