True or False

[RichaS]

c) False, He will choose to work less as he can earn the same amount by working less now that the wage has increased, which is similar to the increase in non wage income.

d)False, No a stipend is a transfer payment therefore it is not included in GDP.

Did you guys get the same answer?

[Sam9953]

@Richa,

I thought of the same answers too but would like someone else to double check as well.

[Nikkita]

1. Acc. to me:
As non- wage income increase (M increase), will lead to work less, if leisure is a normal good and work more, if leisue is an inferior good.

Regarding increase in Wage income, then:
Suppose leisure is a normal good, then as w increase, work less because of income increase, but since cost of leisure also increase simultaneouly, so work more.
Which effect will dominate can't say.
Vice- versa in case of inferior good.

2. stipend, getting same answer..

Is answer looking correct somewhat?

[Sam9953]

Nikkita wrote

1. Acc. to me:
As non- wage income increase (M increase), will lead to work less, if leisure is a normal good and work more, if leisue is an inferior good.

Regarding increase in Wage income, then:
Suppose leisure is a normal good, then as w increase, work less because of income increase, but since cost of leisure also increase simultaneouly, so work more.
Which effect will dominate can't say.
Vice- versa in case of inferior good.

2. stipend, getting same answer..

Is answer looking correct somewhat?

So, because of the ambiguity (because of the normal and inferior good cases), if we have to mark an answer in the exam, we would mark "False", right? Because the statement given in the question will not be applicable in every situation.

[RichaS]

It's safer to go with normal good in case of ambiguity, i guess?

[Nikkita]

What's wrong in marking 'Uncertain'(if MCQ) or mentioning the cases(if subjective paper)?..We can do so well, I guess