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Policy Evaluation for Atypical Preferences
Imagine an individual whose preferences for consumption and free time are structured in a very specific way: whenever they receive an increase in income that doesn't come from working (like a gift or lottery win), they spend all of it on more consumption and do not change the amount of time they spend on leisure. Now, consider two policy proposals aimed at encouraging this individual to take more free time:
Policy A: Provide the individual with a universal basic income grant, a fixed cash payment each month regardless of work status.
Policy B: Implement a program that increases the individual's effective hourly wage rate.
Evaluate the likely effectiveness of each policy in achieving the goal of increasing the individual's free time. Justify your evaluation by explaining how each policy would interact with the individual's described preferences.
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Economy
CORE Econ
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Empirical Science
Economics
Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
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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.
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