Your Boss Has Told You That Because of a Decrease

Multiple Choice

Your boss has told you that because of a decrease in the demand for the designer baby food your firm produces,he will have to cut everyone's salary next year to avoid layoffs.In response to this news you would

A) increase your labour supply because the income effect would be equal to the substitution effect.
B) decrease your labour supply because the substitution effect would be stronger than the income effect.
C) increase your labour supply because there would be an income effect,but no substitution effect.
D) decrease your labour supply because there would be a substitution effect,but no income effect.