Unearned Income Triggers Only an Income Effect

Analyzing the Opportunity Cost of Leisure

An architect earns a wage of $75 per hour. They then win a one-time prize of $10,000 in a design competition. Considering only the immediate effect of this prize, what is the new opportunity cost for this architect to take one hour of leisure (e.g., an hour off work)?

A factory worker who earns $20 per hour receives a one-time, unexpected bonus of $500. As a direct result of this bonus, the amount of income they give up by taking an hour off work has now increased.

Impact of Non-Labor Income on Opportunity Cost

Impact of Non-Labor Income on Opportunity Cost

An individual's daily trade-off between leisure and consumption is represented by a budget constraint line on a graph, with 'Hours of Leisure' on the horizontal axis and 'Consumption ($)' on the vertical axis. The slope of this line is determined by their hourly wage. If this individual receives a large, one-time cash gift, how will their budget constraint line change?

An individual's opportunity cost of free time is the amount of consumption they give up for an additional hour of leisure. For each scenario below, match it with the correct effect on this opportunity cost.

Evaluating a Claim about Opportunity Cost

Evaluating a Claim about Opportunity Cost

A freelance consultant charges $150 per hour for their services. They also receive a one-time government tax rebate of $600. The opportunity cost for this consultant to take one hour of leisure is $____.