movement involves choosing more income, both because the substitution effect of higher wages has made

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B • Indifference Curves 527

income relatively cheaper or easier to earn, and because the income effect of higher wages has made it

possible to have more income and more leisure. Her movement from A to B also involves choosing more

leisure because, according to Petunia’s preferences, the income effect that encourages choosing more leisure

is stronger than the substitution effect that encourages choosing less leisure.

Figure B5 represents only Petunia’s preferences. Other people might make other choices. For example, a

person whose substitution and income effects on leisure exactly counterbalanced each other might react to a

higher wage with a choice like D, exactly above the original choice A, which means taking all of the benefit of

the higher wages in the form of income while working the same number of hours. Yet another person, whose
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