The Work-Leisure Decision

Evaluating Utility as a Standard of Living Metric

An economic model measures an individual's standard of living by combining the satisfaction they get from consumption (what they can buy with their income) and their leisure (non-work time). Consider two individuals:

• Alex works 60 hours a week, earning a high salary that allows for extensive consumption, but has very little free time.
• Ben works 20 hours a week, earning a modest salary, and enjoys a large amount of free time.

Based on this model, which statement provides the most accurate analysis of their standards of living?

Income vs. Standard of Living

In an economic model where an individual's well-being is measured by the satisfaction from both consumption (what they can buy) and leisure (non-work time), a policy that increases a person's income but reduces their free time will always result in a lower overall standard of living.

An economic model measures an individual's well-being by combining the satisfaction they get from consumption (what they can buy with their income) and their leisure (non-work time). Match each individual's preference description to the most likely work-leisure choice they would make.

Policy Impact on Well-Being

Policy Impact on Work-Leisure Choices

A country's economic output per person has doubled over the last 50 years. However, the average number of hours people work per week has also increased by 25%, leading to less free time. According to an economic framework that measures an individual's standard of living by combining the satisfaction from both consumption (what they can buy) and leisure (non-work time), what is the most accurate conclusion about this country's change in living standards?

A technological advancement allows workers to be more productive, meaning they can produce the same amount of output in fewer hours. In an economic framework where an individual's standard of living is measured by the combined satisfaction from consumption (goods and services purchased) and leisure (non-work time), what is the most likely impact of this advancement?

Income vs. Standard of Living