Choice under an Income Windfall

An individual's preferences for daily consumption and hours of free time are such that their indifference curves are vertically parallel. This means that for any given amount of free time, the slope of all indifference curves passing through that point is identical. If this individual receives a large, unexpected, non-work-related cash payment, what is the most likely outcome regarding their choices?

Consider an individual whose preferences for consumption and free time can be represented by indifference curves that are vertically parallel. This means that for any given amount of free time, the slope of every indifference curve is the same. True or False: This individual would be willing to give up more consumption for an extra hour of free time when they have a high income compared to when they have a low income.

Analyzing Preferences from Observed Behavior

Policy Evaluation for Atypical Preferences

An individual makes choices between daily consumption and hours of free time. Match each description of their preferences or behavior with the corresponding economic concept or implication.

An individual currently works 35 hours per week. They receive an unexpected inheritance that provides them with a stable, additional income of $1,000 per month, which does not depend on the number of hours they work. If this individual's preferences for consumption and free time are such that any change in their non-labor income has no effect on their desired amount of free time, the change in their weekly work hours will be ____ hours.

An individual works a set number of hours per week. They receive an unexpected, weekly cash grant from a government program that does not depend on their work hours. After receiving the grant, they continue to work the same number of hours as before, but their weekly spending on goods and services increases by the exact amount of the grant. Which of the following descriptions of their indifference map (representing preferences for consumption and free time) is consistent with this behavior?

An individual's preferences are such that their choice of how many hours to work is completely unaffected by receiving a non-wage-related cash prize. Which statement provides the most accurate economic explanation for this behavior?

An individual's work schedule remains unchanged after the government imposes a new annual lump-sum tax, which reduces their overall income but does not depend on hours worked. However, this same individual chooses to work a different number of hours when their employer reduces their hourly wage. Which of the following descriptions of this individual's preferences, represented by indifference curves on a graph with consumption on the y-axis and free time on the x-axis, is the most consistent with their behavior?