The Effect of a Wage Change is Contingent on the Utility Function
The ultimate impact of a wage change on an individual's choice of free time is not universal, as it depends on their specific preferences, which are represented by different mathematical forms of utility functions. For instance, while a utility function like causes free time to consistently decrease with a wage rise, other functions can produce more varied outcomes. A key example is the utility function , where the result of a wage increase is conditional on the level of unearned income (): the income effect dominates when is low, and the substitution effect dominates when is high.
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Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.3 Doing the best you can: Scarcity, wellbeing, and working hours - The Economy 2.0 Microeconomics @ CORE Econ
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