In our treatment of leisure/consumption tradeoffs, we have assumed that you are deriving income solely from wages.
A: Suppose now that your grandparents set up a trust fund that pays you $300 per week. In addition, you have up to 60 hours of leisure that you could devote to work at a wage of $20 per hour.
(a) On a graph with “leisure hours per week” on the horizontal axis and “weekly consumption in dollars” on the vertical, illustrate your weekly budget constraint.
(b)Where in your graph is your endowment bundle?
(c) How does your graph change when your wage falls to $10?
(d) How does the graph change if instead the trust fund gets raided by your parents, leaving you with only a $100 payment per week?
B: How would you write your budget constraint described in 3.2A?