Final answer:
The substitution effect of a wage increase in the labor-leisure choice model causes an individual's choice of hours worked to c. increase because leisure time becomes relatively more expensive, incentivizing more work hours.
Step-by-step explanation:
In the context of labor-leisure choice and consumer decision-making when dealing with scarcity, the substitution effect of a wage increase would always cause an individual's choice of hours worked to increase. This is because the substitution effect implies that as wages rise, the cost of leisure becomes relatively higher. Consequently, individuals are incentivized to substitute leisure time for working hours, as the opportunity cost of leisure has increased and it is economically more advantageous to earn more income. On the other hand, the income effect might lead an individual to work fewer hours due to the increase in effective wealth, wanting to enjoy more leisure time which is now more affordable. However, the question specifically asks about the substitution effect, which predicts an increase in labor supply, therefore, the answer is c. Increase.