A College student receives a weekly allowance of $200 from parents. The student has the opportunity to work in the neighborhood grocery store and earn $14 per hour. During a week the student needs 10 hours per day for personal maintenance.

i. Calculate many hours can the student allocate per week for discretionary activities? 

ii. If he allocates all hours for discretionary activities for working - calculate the worth of consumption goods he can purchase? (2 marks).

iii. If he allocates all hours for nonmarket time, what is the worth of consumption goods he can purchase? 

iv. If the minimum wage is raised to $15, how will the student's decision regarding splitting the hours for discretionary activities change? Explain your answer in terms of the Income effect and substitution effect covered in-class lecture. (6 marks). Your answer must not exceed 10 sentences and must clearly explain the concept of Income effect and substitution effect.

Answer rating: 100% (QA)

i The student can work up to 28 hours per week and still have enough time for personal maintenance i... View the full answer