Question

Daniel had been earning ​$69 per hour and working 45 hours per week. Then​ Daniel's wage changes to ​$83 per​ hour, and as a​ result, he now works 40 hours per week. What can we conclude from this information about the income effect and the substitution effect of a wage change for​ Daniel? The substitution effect causes Daniel to devote less more the same amount of time to working

Answer 1

Answer: In times of crisis or economic boom, changes such as the substitution effect and income effect may occur; in this case, Daniel suffers a variation in his work in the increase in the value of the hours worked and the decrease in hours worked per week; this can generate, or positive changes such as spending more time with his family and the appreciation of its workforce, as adverse effects, in which it stands out to be forced to respond to higher expenses due to the increase in the cost of living.