An hourly-paid employee receives a large, one-time, unconditional cash prize. Assuming this individual values both material consumption (things they can buy) and free time, and that they tend to want more of both as their overall purchasing power increases, what is the most likely change in their behavior?

Analyzing the Impact of Unearned Income

Consider an individual who values both material goods (purchased with income) and free time. If this person receives a substantial, one-time cash payment that does not depend on the hours they work, the most logical outcome is that they will choose to work more hours to maximize their total consumption of material goods.

Explaining Worker Behavior After a Windfall

Analyzing the Response to a Non-Labor Income Increase

An individual who is paid by the hour receives a large, one-time cash gift that is not related to their work. Below are several possible changes in their behavior. Match each behavioral outcome to the economic description of their preferences that would most likely cause it.

An office worker is paid by the hour and has the flexibility to choose their weekly work schedule. They receive an unexpected, one-time cash bonus that is not tied to their performance or hours worked. Given that this individual values both the goods they can purchase with their wages and their unpaid personal time, they will most likely choose to work ____ hours in the period following the bonus.

Analyzing Contrasting Choices After a Windfall

A freelance graphic designer earns $50 per hour and can choose how many hours they work each week. They currently work 40 hours per week, earning $2,000. This week, they receive an unexpected, unconditional $1,000 cash gift. The designer values both the goods they can purchase with money and their free time, and generally desires more of both when their overall financial situation improves. Which of the following new weekly plans is the most plausible outcome for the designer this week?

Evaluating a Policy Claim on Unearned Income