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Comparing Responses to a Financial Windfall
Two individuals, Alex and Ben, work at the same company for the same hourly wage. Both receive an unexpected, one-time $1,000 bonus. In the week following the bonus, Alex decides to work 10 fewer hours and increases their total spending on goods and services by $200. Ben decides to work only 1 fewer hour and increases their total spending by $850. Analyze the choices made by Alex and Ben. What can you infer about their relative preferences for consumption versus free time? Justify your reasoning.
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Science
Economy
CORE Econ
Social Science
Empirical Science
Economics
Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.3 Doing the best you can: Scarcity, wellbeing, and working hours - The Economy 2.0 Microeconomics @ CORE Econ
Analysis in Bloom's Taxonomy
Cognitive Psychology
Psychology
Related
Impact of a Financial Windfall on Work-Leisure Decisions
An individual works for an hourly wage and enjoys both their free time and the goods they can purchase with their earnings. This week, they receive an unexpected cash bonus, separate from their wages. If this individual considers free time to be a desirable good that they want more of as they become wealthier, which of the following outcomes is the most probable?
Explaining the Allocation of a Windfall
An individual who values both consumption and free time receives a one-time, non-wage payment of $500. According to the standard model of choice, if this individual decides to work fewer hours after receiving the payment, their total consumption of goods must decrease.
An individual earns $20 per hour and can choose how many hours to work each week. This week, they receive an unexpected, one-time bonus of $400 that is not tied to their work hours. In response, they decide to work 5 fewer hours than they normally would. Assuming they spend all of their income, by how much does their total weekly consumption of goods and services increase?
Analyzing the Net Change in Income
Calculating the Impact of Non-Labor Income on Consumption
Comparing Responses to a Financial Windfall
Calculating the Allocation of a Windfall
An individual who is paid an hourly wage receives a significant, one-time, non-wage cash payment. As a result, they choose to reduce their weekly work hours, as they value both purchased goods and free time. Which of the following statements correctly analyzes the components of the change in their total weekly funds available for consumption?
An individual who values both consumption and free time receives a one-time, non-wage payment of $500. According to the standard model of choice, if this individual decides to work fewer hours after receiving the payment, their total consumption of goods must decrease.