Generalized Budget Constraint for the Student's Summer Break

An individual's budget constraint illustrates the different combinations of consumption and leisure they can afford, based on an hourly wage for time spent working. If this individual suddenly receives a large, one-time monetary gift from a relative, how does this event alter their budget constraint?

Analyzing Financial Resources

Impact of Non-Labor Income on Choices

In a model of an individual's choice between work and leisure, receiving a fixed weekly monetary gift affects the budget constraint in the same way as an increase in the hourly wage rate.

An individual's budget constraint illustrates the trade-offs between consumption and leisure. Various financial events can alter this constraint. Match each event with its corresponding effect on the budget constraint.

Comparing Income Sources and Their Economic Impact

An individual has 100 hours available per week to allocate between work and leisure. They earn an hourly wage of $15. In addition, they receive a fixed weekly allowance of$50 that does not depend on the hours they work. If this individual chooses to work all 100 available hours, their total weekly consumption capacity would be $____.

An individual has a fixed number of hours per week to divide between work (at an hourly wage) and leisure. They also receive a consistent, weekly payment from a source unrelated to their work. To explain their total purchasing power, you need to break down the components of their budget. Arrange the following steps in the logical order used to construct their complete budget constraint, starting from the most basic element.

Evaluating Financial Scenarios

An individual's economic choices are represented by a budget constraint that shows the trade-off between hours of leisure and total consumption, with the slope determined by the hourly wage. This individual begins to receive a significant, regular monetary payment from a family trust fund, which is not dependent on the number of hours they work. Which statement best analyzes the effect of this new income on their budget constraint?

Calculating Ella's Income from Part-Time Work and a Child Grant