Question

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.

Answer 1

causes a parallel shift in the consumer's budget line

Step-by-step 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.