An increase in the real wage rate represents a pure income effect. represents a pure substitution effect. represents a combination of income and substitution effects. causes a parallel shift in the consumer's budget line.

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Business

Ernesto Crosby

17 September, 04:53

An increase in the real wage rate represents a pure income effect. represents a pure substitution effect. represents a combination of income and substitution effects. causes a parallel shift in the consumer's budget line.

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Moises Sparks · Answer 1

causes a parallel shift in the consumer's budget line

Explanation:

An increase in the real wage rate represents a pure income effect causes a parallel shift in the consumer's budget line.

An increase in income causes the consumer's budget line to shift outward, parallel to the original line (holding prices constant) while a decrease in income causes the budget line to shift inward, parallel to the original line (holding prices constant) because a consumer can buy less of goods and services with less income.