Explain whether this is rational economic behavior.?

Question

As some people's per hour wages go up, they actually choose to work less and leisure more.

Answer 1

Yes, this is rational.

The substitution effect says that when things get more expensive you consume less of them.

The income effect says that when you get richer, you consume more normal goods and less inferior goods.

Increasing the wage is an increase in the opportunity cost of leisure.  Leisure gets more expensive, so by the substitution effect, you consume less leisure.

Increasing the wage will increase income.  An increase in income will result in consuming more leisure, as leisure is a normal good.

Whether you consume more or less leisure depends on whether the substitution effect or income effect dominates.  For some people, substitution effect dominates and for others income effect dominates.  So if your income effect dominates, the increase in income results in more leisure.  So this is rational behavior for someone whose income effect dominates their substitution effect.

Answer 2

yes this is rational economic behaviour  . . which also leads to a backward bending individual labour supply curve. . this happens due to substitution effect. as you now have more money and less leisure you tend to assign more utils to the leisure and eventualy increase it