Question

Which of the following describes the substitution effect?(1 point)
Responses

As wages increase, an individual's leisure becomes more costly, making him less likely to choose leisure over labor. As the price of Coca Cola rises consumers purchase more Sprite.
As wages increase, an individual's leisure becomes more costly, making him less likely to choose leisure over labor. As the price of Coca Cola rises consumers purchase more Sprite.

As wages increase, an individual's total potential income rises, making him less likely to choose leisure over labor. As a consumer increases their income they purchase more desserts, a normal good.
As wages increase, an individual's total potential income rises, making him less likely to choose leisure over labor. As a consumer increases their income they purchase more desserts, a normal good.

As wages increase, an individual's total potential income rises, making him more likely to choose leisure over labor. A consumer buys more milk each time they purchase cereal.
As wages increase, an individual's total potential income rises, making him more likely to choose leisure over labor. A consumer buys more milk each time they purchase cereal.

As wages increase, an individuals leisure becomes less costly, making him more likely to choose leisure over labor. As hamburgers becomes cheaper consumers purchase more steak.
As wages increase, an individuals leisure becomes less costly, making him more likely to choose leisure over labor. As hamburgers becomes cheaper consumers purchase more steak.

Answer 1

The first option.

Explanation: The substitution effect means people switch toward relatively cheaper alternatives (leisure becomes more costly when wages rise, so they work more; Coke↑ leads consumers to buy more Sprite).