pic Economics for all: SE and IE

Thursday 25 September 2008

SE and IE

With the substitution effect an economic agent in the labour market would work more when their wage rate increased because then they get more income but with the income effect the result is in the opposite way because a rise in income would mean that the agent would spend more on leisure, so it could be read that substitution effect is spending more on work and income effect is spending more on leisure if that helps.

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