An individual works 40 hours per week when the wage rate is $7 per hour. When the wage rate is increased to $9 per hour, the individual works 36 hours per week.
What explains the change in the number of hours worked?
1 )
a negative income elasticity of demand for leisure
an income effect outweighing a substitution effect
3 )
an income effect reinforcing a substitution effect
4 )
a zero income effect
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