An individual is paid a fixed hourly wage for their work. One day, they receive a significant, one-time cash gift from a family member. Assuming that time off from work is a 'normal good' for this individual, what is the most likely impact of this gift on their work-leisure choice, and what economic principle explains this change?

An individual who works for an hourly wage wins a small, lump-sum lottery prize. They subsequently decide to reduce their weekly work hours. This change in behavior is correctly explained by the substitution effect outweighing the income effect.

Analyzing the Effects of a Windfall Gain

Comparing Responses to Different Types of Income Gains

Analyzing Labor Supply Responses to Policy Changes

Evaluating Economic Relief Policies

For an individual who can choose how many hours to work, match each change in their financial circumstances to the correct description of its impact on their work-leisure decision.

A one-time, lump-sum government stimulus check does not produce a substitution effect on an individual's work-leisure choice because it does not change the __________ of taking an hour of free time.

An individual's choice between work and free time can be shown on a graph with 'Consumption' on the vertical axis and 'Hours of Free Time' on the horizontal axis. The slope of the line representing all possible combinations of consumption and free time is determined by the hourly wage. If this individual receives a large, one-time, non-work-related cash payment, how will the line representing their possible choices change?

Evaluating an Economic Argument

Comparing Responses to Different Types of Income Gains